What Is the Difference Between a Furlough and Layoff?

Although furloughs and layoffs have the same short-term financial consequences, the immediate loss of your income can lead to very different long-term effects.

If you have just lost your job and wonder about the difference between furlough and layoff, you need to know.

Furlough is a compulsory, temporary leave, reduced hours, or a pay cut. Employers use furloughs to reduce payroll due to business decline or economic downturn. In addition, both private employers and public agencies may use furloughs to save costs.

However, employees are free to look for new work during a furlough, and companies may decide to terminate their positions permanently by retrenchment if the economic situation does not improve.

During recess, employers may place all employees on unpaid leave, exchange furloughs with employees, or remove those employees from nonessential activities.

In addition, depending on your employees, whether they are discharged or not, employers may ask them to take one day off unpaid leave per week or lay off employees for weeks or months.

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The Difference Between Furlough And A Layoff

The main difference between a layoff and furlough is that although furlough is intended to be temporary, a layoff is permanent. Therefore, there is no guarantee that you will get your job.

Often, companies turn to layoffs when they need to cut costs quickly. Retrenchments save employers’ expenses such as health insurance premiums, retirement contributions, and other fees that may be difficult to meet during the recession.

However, because laid-off workers often do not return to their jobs after the economic crisis has passed, a layoff may be a more expensive option over time if employers need to work again. Depending on hiring and training, it can cost one to two percent of an employee’s annual salary instead of employment.

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Furloughed Workers: Exempt vs. Non-Exempt Status

Unemployed workers are entitled to overtime pay under the Fair Labor Standards Act (FLSA), whereas exempted employees do not. The federal government offers several tests to determine whether workers are entitled to overtime pay, including job benefits and a minimum wage.

Employees who are not exempted from FLSA standards are entitled to overtime time and a half-hour overtime pay of more than 40 hours per working week. As of January 1, 2020, the salary limit is $684 per week.

Hour Worker Guidelines

Typically, non-exempt employees are full-time employees in non-administrative roles. Your status as an exempt or non-exempt employee is essential for furloughs because it can determine how your employer can place you on unpaid leave.

Employers can furlough hourly employees by reducing their schedules, for example, from 36 hours to 30 hours per week. Or they may place employees in a “zero hour” plan where employees remain on company payroll but do not enter the workforce without pay.’] We have less than the minimum wage.

Salaried Workers Guidelines

Different rules apply to exempt employees. For the most part, companies can reduce the salaries of salaried employees as long as that salary is consistent and in line with the company’s long-term prospects plan.

However, pay cuts may result in the loss of some employees’ exempt status, making those employees eligible for overtime pay.

Salaried employees cannot do any work for their employer during a no-work furlough even by checking email. If you are a salaried employee and need to work during a furlough, your employer may be required to pay you the equivalent of a full-time job.

Next Steps When Furloughed

Whether you are a part-time or salaried employee, you have rights if you are furloughed. For example, you may be entitled to receive advance notice of furlough or layoff through the Employee Rehabilitation and Training Act (WARN).

According to this precautionary measure, a company that employs more than 100 full-time employees (or part-time workers who work more than 4,000 hours per week combined) must give 60 days’ notice before furlough, layoff, or termination.

You may also be compensated for being unemployed at resignation. In addition, employees who are furloughed laid off, or unemployed without merit can receive unemployment benefits.

Typically, employers will continue to provide health care during temporary breaks like furlough. However, you may need to pay your employee contribution, which can be challenging if your pay is suspended.

If your retirement leads to job loss, you may also be eligible for COBRA (Consolidated Omnibus Budget Reconciliation Act). But again, that can be expensive.

You may also qualify for a particular registration period in exchange for affordable care action. In addition, depending on your income, you may be eligible for subsidized insurance.

Next Steps If You Are Laid Off

No union rules require employers to pay employees severance pay after being laid off. However, many companies choose to offer such a split as an act of kindness and investment in their employer’s product.

If you were fired without your fault, you probably have the right to compensation for not working. Depending on your situation, you may also be eligible for extended unemployment benefits, including an additional $ 600 per week and extended eligibility for 13 weeks after the expiration of standard benefits.

In most regions, you can file benefits online.

If you have worked for a company with 20 or more employees, you are eligible to continue with your employer-sponsored health care under COBRA. However, you will need to pay the total monthly premium, which may be several times the cost of your contribution as an employee.

Depending on your financial situation, you may be eligible for Medicaid. Meanwhile, the Children’s Health Insurance Program (CHIP) provides health care for children, and in some regions, and for pregnant women.

How to Move Forward After Furlough or a Layoff

If you have been furloughed or laid off, it is normal to feel uneasy even though you may think that you may lose your job. Likewise, it may be challenging to feel confident about your new position in a time of widespread unemployment. But be courageous: even in an economic crisis, it is possible to get a job.

The first step is to get information about your position. Talk to the labor department of your former employer and find out as much as you can about resignation, unemployment, employee benefits, unpaid vacation, sick leave, and so on.

Then, apply for unemployment benefits. Even if the employer says you are not qualified, it is a good idea. You may be surprised at how well you are eligible.

Examine your finances and make a short-term and long-term financial plan to prepare yourself if your unemployment benefits expire before getting another full-time job.

Lastly, do not put all your hopes. Do your job search on job search sites, social media, and network contacts. You never know where you may find your next job.


Unlike layoffs, furloughs are meant to be temporary. Employees stay in the organization’s records and may return to work after the end of the furlough.

You can get cheaper options under the Affordable Care Act and qualify for tax credits based on your income.

Remember that if you are called back from work by your employer, you will likely lose your job benefits if you do not return to work when the business is reopened.

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