Definition of the Difference Between Layoff and Furlough
Both a layoff and a furlough save an employer money. A furlough is a temporary layoff. A furlough is an alternative to a permanent layoff, because instead of being fired, employees do not come to work on certain days. In a layoff, the employer does not assign employees to work during days that they would normally work. In a permanent layoff employees are fired, and with a temporary layoff the employer may call back employees. The advantage of the furlough is that the employees get to keep their jobs, although each employee works fewer days during the month and earns less money.
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Unemployment
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If a worker is laid off from a job, the worker may qualify for unemployment benefits. According to the state of Kentucky, an employee on furlough usually cannot receive unemployment because the employee works during part of the month. The employer has to pay a higher unemployment premium after a layoff because employees receive unemployment, so a furlough reduces the unemployment premium expense.
Benefits
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When an employee takes a furlough, the employee gives up only the salary for the days that the employee would normally work. The employee keeps eligibility for other programs, such as health insurance coverage, during the furlough days. The rules for paying into health insurance and pension plans still apply, so the employer must make the agreed contributions and the employee must make the agreed contributions, depending on the contract terms.
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Voluntary Furlough
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Some employers allow an employee to take a voluntary furlough. The voluntary furlough is similar to an unpaid vacation, and the employee can return to work after the furlough. In the state of South Carolina, if an employee takes a voluntary furlough for several days, the employee can count these days against a mandatory furlough that the state declares later in the year.
Total Income
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A layoff is more beneficial to employees who remain at the company than a furlough. A furlough reduces the amount of hours that an employee works, which also reduces the employee's pay. If the employer lays off workers it cannot afford instead, the employees who keep their jobs can still work their normal hours and earn the same amount of money.
Compensated Absences
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The purpose of a furlough is to reduce an employer's compensation expenses. The employer usually forbids an employee from receiving overtime during the furlough week and does not allow the employee to take a compensated sick day or a vacation day during the furlough. If an employer lays off an employee, the employee may still have the right to receive pay for accrued sick days or vacation days.
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References
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