Furlough : Meaning, Reasons, Benefits and Limitations

What is Furlough?

Furlough is simply defined as the temporary leave or absence from work, for which you are not paid. It is different from normal leave because the employer will provide you with this leave even when you don’t need a leave. Employees take normal leaves for personal reasons but “Furlough” is provided due to uncertain conditions like financial challenges or during periods of reduced business activity in the company. Furlough is a temporary leave provided by the company. As it is a leave, no salary will be provided during the furlough period.

How does Furlough Take Place in the Workplace?

1. Decision Making: For deciding the need for temporary leave a proper meeting takes place, where the need for temporary leave, economic conditions, budget cuts, or other reasons impacting the organisation’s finances are discussed. After this, the management decides the following things, duration for temporary leave, which employees or departments will be affected, complete stoppage of work or reduced hours, etc.

2. Legal Consideration: The management will decide whether this furlough plan follows all labour laws, employment contracts of employees, required notice periods, complying with any collective bargaining agreements, etc. Because it is necessary otherwise company may have legal problems. After declaring that the plan follows all legal policies, we will move to the next step.

3. Communication: This involves communicating with the employees who will be on furlough, clearing their doubts regarding this, explaining to them the reasons that led to this furlough, and explaining to them the changes in their salary and benefits. For example, discussing other benefits, such as health insurance, retirement contributions, or other perks are provided to employees or not during this period.

4. Implementation and Monitoring: Implementation of Furlough begins when employees are either instructed not to work or to work reduced hours. During this time, they may not receive their regular salary. Regular monitoring of the conditions that lead to furlough and making changes according to the situation such as adjusting the duration of furlough.

5. Support: Employers provide support to employees on furlough by providing them with updated information about unemployment benefits, counselling services, or resources to help them navigate the temporary financial challenges. This support is necessary because employees may also face financial problems during this period.

6. Return of Work: During the end of the furlough period employees need to join to company. This return back date should be discussed during communication. Information about any date changes to return or conditions under which employees will be called back to work should be provided to the employee through any digital form.

Benefits of Furlough To Employees

1. Job Security: As we understand furloughs are temporary, so you have job security. Furlough does not mean that you have lost your job, it just means that you are on leave and join back with the organisation when the organisation’s financial condition improves. This will be peace of mind for employees that they are not permanently separated from their jobs.

2. Retained Employment Benefits: In many cases, you will not receive your monthly salary during the furlough period but you will continue receiving perks and benefits other than salary during the furlough. This may include your health insurance, retirement contributions, or other perks. This will help you in reducing your financial burden during hard times.

3. Time for Skill Enhancement: Because you are free during the time of furlough and don’t need to worry about the work of your job, you can sharpen your skills during this period by practising, enjoying spending time with your family, following your hobbies, etc. This can be a good breakthrough from hard work. You can join back with a fresh mind. This can lead to personal growth and potentially make them more valuable to their employer upon return.

4. Eligibility for Unemployment Benefits: In many places furloughed employees are eligible for unemployment benefits. Unemployment benefits are provided to those who don’t have any job to fulfill their financial requirements. So, these unemployment benefits will also help to compensate for lost wages during the furlough period. The specific eligibility criteria and benefit amounts vary by location, so employees should check with their local unemployment office for details.

5. Potential for Remote Work: During this time you cannot join a new job but still you can earn money through temporary job opportunities or side gigs. For example, you are a web developer. On furlough, you can design a website as a freelancer, etc. This will not only provide you with a little income but also help increase your knowledge, skills, and experience.

Limitations of Furlough To Employees

1. Loss of Income: The biggest and the most immediate limitation with furlough is loss of income. During furlough employees are not receiving any salary. So it becomes difficult to complete their financial needs those who have saved money for some purpose have to use their saved money and those who don’t have savings have to find other income sources.

2. Uncertainty: Durations of furloughs are very uncertain and unpredictable because companies are adjusting the dates according to their financial conditions. So, it creates stress for employees that when they can rejoin the join and continue their work. It also becomes difficult for employees to plan finances.

3. Limited Control Over Work: During the furlough, the work schedule of the employee is completely controlled by the employer. They will decide the work hours which will disrupt the proper schedule of employees. This will reduce the flexibility in work for employees. He will get limited access to resources in the company also employees on furlough have very little involvement in decision-making processes during the furlough period.

4. No Career Progression: Because you are reporting to the office and not doing any work during furlough it will reduce chances of career progression. It will lead to missed opportunities for skill development and advancement within the organisation. The employees who are not on furlough have better opportunities for promotion and learning.

5. Bad Psychological Impact: The uncertainty combined with the feeling of being devalued, can have bad psychological impacts on employees including stress, anxiety, and a sense of insecurity about one’s place within the organisation. It will also affect the morale or confidence of employees. Employees might think of themselves as unworthy.

Difference between Furlough and Layoff

Basis	Furlough	Layoff
Meaning	Temporary leave of absence without pay, with the expectation of a return to work.	Permanent termination of employment due to various reasons, often resulting in the loss of the job.
Duration	Temporary but may be specified or unspecified depending on the organisation’s financial conditions.	Permanent; employees do not return to work for the same employer.
Employment Status	Employees remain employed but don’t get the salary.	Employees are no longer employed by the organisation.
Compensation	Often involves reduced or no pay during the furlough period, but benefits, like health insurance may be maintained.	Generally, employees receive severance pay (if any) but that’s the last compensation, after that they lose all benefits.
Job Security	It is temporary so employees will return to their position when the furlough period ends.	Loss of job security as the termination is permanent.