Furlough vs. Layoff: Which Gets the Most Benefits?

With millions of workers unemployed and more likely to come during this economic shutdown, companies have been deciding between placing their employees on furlough or laying them off. Many retail companies like Macy’s, Kohl’s, Gap and Nordstrom as well as some in the hospitality industry such as Marriot and AMC Theatres have opted to furlough thousands of their employees instead of laying them off. But what exactly does being furloughed mean, and how does it differ from being laid off?

What is a furlough?

A furlough is a temporary, company-mandated, unpaid leave from work. Employers usually opt to furlough employees as a cost saving measure which could last a few weeks or a couple of months. During this period, a furloughed employee remains more likely to be entitled to receiving employment benefits such as health insurance and 401(k) contributions.

How does it differ from being laid off?

If you are furloughed, you technically still have a job to return to once you are called back, whereas a layoff dictates you no longer have a job. Furloughs also differ from layoffs because they reduce labor costs without adding new expenses such as severance packages or recruiting and training costs once the business is ready to reopen. A furloughed employee is preferable in this situation because as an experienced worker, they can pick up where they left off and an employer does not have to worry about new hires.

Due to the government’s significant increase in unemployment benefits as well as temporary payouts during the coronavirus crisis, they have given many companies an incentive to furlough its employees as opposed to cutting payroll permanently. Since they can opt to allow the government to bear most of the cost of their employee’s unemployment, businesses have more of a motivation to continue paying health and retirement benefits.Whichever position you may find yourself in, whether it is furloughed or laid off, you have rights during this time. Call our employment law firm, Fitapelli & Schaffer, for a free phone consultation at (212) 300-0375 to see what you may be entitled to. You can also browse our site for additional useful information here.