The Effects of an Employee Furlough
Employee furloughs are defined as time off without pay. Frequently, employers use furloughs as an alternative to job reductions or job eliminations. An employee does not work and as a result, receives no pay. A company usually implements furloughs when they believe that the downturn in business will be short and that employees will be recalled to work soon. Payroll costs are reduced through furloughs while workers lose their source of income. The company goal is to preserve jobs and their future.
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Employer Effects
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An employer uses employee furloughs as a means to save money and continue operations. Salary is usually the biggest expense of a small business, and reducing your work force, even temporarily, can save many dollars for the bottom line. Benefits payments are usually still incurred during a furlough, but payroll is reduced when fewer workers must be paid. By using a furlough, your organization hopes to see conditions improve and some, if not all of the employees can be recalled.
Employee Effects
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The effects on an employee during a furlough can be immense. Pay is completely lost and income drops to zero. Furloughs are usually indefinite and employees are left to wonder whether they should seek new employment or simply wait to be recalled. Employees who were not furloughed must pick up the work for their missing associates, increasing both their workload and stress levels. Surviving employees may also experience "survivor guilt," where they wonder why they are still working while their friends and coworkers are not.
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Customer Effects
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Customer service will suffer with employee furloughs. Fewer workers can serve customers, lines and wait times are longer, and complaints might rise. Follow-up with customers over orders and questions are delayed because your work force is reduced, resulting in less attention to detail. Your customer service image also suffers as customers realize they are paying the same amount of money for less service. Overworked employees may not always treat your customers as they should when priorities conflict with providing excellent customer support.
Long-term Effects
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While furloughs provide immediate financial relief for your company, the long-term effects can be damaging. Employees wonder whether they will be the next for a furlough and their work and quality might decrease because of these worries. Recruiting new employees might prove difficult when applicants understand a furlough has happened in the past and wonder if it will happen again. Your top performers, who most likely were not furloughed, could also begin a job search or be recruited by your competitors who can provide them with more job security.
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References
- HRhero: Employee Furloughs and Related Wage and Employment Laws
- Ere.net: Employee Furloughs Can Be a Bad Alternative to Layoffs; John Sullivan
- The HR Answer Book: Shawn Smith, Rebecca Mazin
