What is an Employee Furlough?
A furlough is put into place by an employer as a temporary non-duty, non-pay status on an employee because of budget issues, lack of work, or other non-disciplinary reasons. They can be voluntary or mandatory, and are not considered layoffs because the employee still works on a semi-regular basis. A big incentive for employers to implement a furlough is to improve employee morale. While it is not an ideal scenario, it is almost always the better option when an employer is forced to make budget cuts.
Sometimes the Furlough can be as simple as asking an employee to take every other Friday off, which usually won’t impact their paycheck too much. Other times employees are forced to take much more time off, and this can be discouraging; however compared to the damage a layoff could do to a business’ morale, it is definitely the better option.
When it comes to implementing a furlough, it is significantly easier to do so for non-exempt employees. Typically non-exempt employees are only paid for hours worked, so if an employer has to send someone home or ask them not to come in for one day, they simply continue to record their worked hours as normal. There is one thing to consider with non-exempt employees, however: depending on how many hours are cut, your employee’s status may change from full-time to part-time. This could, in turn, affect the employee’s benefits eligibility. Particularly with the ACA laws that have been put into place over the last couple years, this can cause a few hiccups when it comes to year-end reporting.
With exempt employees, furloughs can get a little more tricky. Under the Fair Labor Standards Act (FLSA), exempt employees are entitled to a full weekly salary if they work during that week. If they do not receive the full pay, they jeopardize the employee’s exempt status. This does not mean exempt employees cannot be furloughed, however; they simply have to be gone for the entire week. Again it’s important to monitor closely just how often an exempt employee is furloughed, as it can affect their benefit eligibility as well.
The one thing you have to consider with employee furloughs is why you’re choosing to implement them. If your business is forced to make budget cuts, you might be forced to choose between implementing an employee furlough and a layoff. A furlough is certainly the easier option, as you will not be forced to look someone in the eye and terminate them without causation. That being said, if not everybody in your office is performing well, you might have to consider how a layoff could help both your budget cuts and your base level of productivity. It certainly isn’t an easy decision, so think carefully and weigh the pros and cons before making any sort of commitment.