How to Deal with a Furlough
The COVID-19 pandemic has created massive economic uncertainty in the U.S., leading to many companies taking drastic measures to cut costs. One of the ways employers are cutting costs is to furlough most, if not all, of their employees.
For some workers, this may be the first time they’ve been furloughed. Therefore, it’s important to know exactly what a furlough is, how it differs from being laid off, and what your options are if you’ve been furloughed.
Many major U.S. companies recently announced furloughs and many more probably will in the coming weeks, as the COVID-19 health crisis continues. Companies in industries like hospitality, tourism, retail, and foodservice have instituted furloughs because social distancing restrictions essentially shut their businesses down.
Empire Resume will delve into the specifics of furloughs and let you know why companies do them, what you should and shouldn’t do after being furloughed, and how to make the best out of the tough situation.
What is a Furlough, Exactly?
A furlough is when companies require their employees to take an unpaid leave of absence. Furloughs are meant to be temporary – meaning employees won’t work or get paid for a period, but they’re technically still employed by the company.
During a furlough, employees expect to return to work when the company is ready. By contrast, a layoff is permanent, and the job is eliminated.
Furloughs are common in some industries, such as for government workers who are furloughed during government shutdowns. Construction and landscaping companies also typically furlough workers during their non-busy seasons.
Companies impacted by the pandemic are resorting to furloughs as one of many ways to reduce costs. Labor costs typically account for the largest share of a company’s costs, so when times are financially tough, reducing labor costs is one of the first places a company will look. Other cost-cutting strategies companies are using right now include reducing work hours, mandating pay cuts, and laying off employees.
In some cases, furloughs have a specific end date when employees can expect to return to work. Furloughs can also have an indefinite timeline that leaves the end date more open-ended. Because of the uncertainty surrounding the pandemic, many companies have instituted indefinite furloughs.
Pros and Cons of Furloughs
Furloughs have pros and cons for companies and their employees. For companies, furloughs can help the business stay solvent during tough financial times. When economic conditions improve, furloughs allow companies to bring back most of the same staff and avoid the hassle of recruiting and re-hiring workers.
One advantage for furloughed employees is that, unlike layoffs, a furloughed worker usually has a job to return to. In some cases, workers may also retain their health insurance and benefits coverage for a certain time, although companies aren’t required to continue providing them.
For example, after Macy’s recently furloughed most of its employees, it announced it’ll continue to provide medical, dental, vision, and other insurance benefits through May, according to CNBC.
A downside of furloughs for companies is their workers may seek jobs elsewhere. The terms of a furlough are usually specific to each company. So unless a company requires workers to sign a contract that forbids them from seeking work elsewhere during the furlough, an employee could always find another job.
Know the Terms and Conditions
The furloughs caused by the COVID-19 pandemic have been especially hard because no one knows when the health crisis will end.
A furlough can also morph into a permanent layoff and loss of employment. Companies that have recently furloughed employees may later be forced to close entirely if economic conditions don’t improve.
If you get furloughed, it’s important to know what the exact terms and conditions of the furlough are. First off, don’t panic – being furloughed does have some advantages and it’s better than being laid off and permanently losing your job. The first step you’ll need to take after being furloughed is to get as many details as possible from your employer.
Your employer likely won’t be able to tell you when the furlough will end. But you can ask your company if it’ll provide the same health benefits during the furlough. If they aren’t providing health benefits, you’ll need to apply for health insurance immediately through the health insurance marketplace.
Also, ask your employer if you’ll be expected to work at all during the furlough. Your company’s answer to this question will depend on a variety of factors. If you’re a salaried employee, you shouldn’t work at all – unless your employer has furloughed you part-time. If that’s the case, you shouldn’t work except on the days or weeks that you’re required to work.
If you’re an hourly employee, the company is only required to pay for the hours you work during a furlough. A company may also institute a no-work rule, which means all employees (hourly and salaried) shouldn’t work during the furlough.
Lastly, ask the company if you can cash in on your accumulated vacation and sick days, which will help soften the blow of losing your paycheck. Companies aren’t required to let workers do this, so don’t assume your employer will. Nevertheless, it’s still something you should ask about.
Your company will probably send you some paperwork explaining the conditions of the furlough. Read the paperwork carefully and don’t be afraid to ask questions on anything you’re unsure about.
Unemployment is Available
There are a few other things to do as soon as possible if you get furloughed. In normal circumstances, a worker would have to be fully laid off to qualify for unemployment benefits. The pandemic has changed that.
The federal government has expanded unemployment eligibility because of COVID-19. One of the expanded criteria stipulates that if a worker is furloughed or prevented from coming into work because of the coronavirus, they now qualify for unemployment benefits.
However, keep in mind that unemployment eligibility may still vary depending on your state. Check your state’s unemployment website for information and how to apply. Also, be patient – a record number of Americans have applied for unemployment in recent weeks, so there’s a big backlog in cases.
Depending on your financial circumstances, you may also want to seek additional employment after being furloughed. It may seem like no companies are hiring right now because of the pandemic, but that’s not necessarily the case. As we recently reported, some companies (like CVS, Amazon, and grocery stores) have increased hiring because they’ve become essential businesses.
There are a few things to keep in mind, though, if you look for additional work. First off, if you make any type of income while on unemployment, you’ll have to report it to the unemployment office. This could alter your unemployment benefits and the amount of money you receive.
Also, if you take a full-time job, you’ll need to resign from the job you’re furloughed from. Lastly, many of the new job openings available right now are on the frontlines of the pandemic, so you’ll be in regular contact with the public and at a higher risk of contracting COVID-19. There is a possibility of finding remote work and work-from-home arrangements, but the lion’s share of new job openings now is at essential businesses like grocery stores.
Managing Finances While Furloughed
Even if you expect to receive unemployment benefits, it may take a little time before you start getting the money. In the meantime, there are things you can do to stay financially afloat after you’ve been furloughed.
If you don’t already keep a budget, now’s the time to start. Figure out exactly how much money you must spend each month, which will allow you to start cutting unnecessary expenses. Depending on how tight your budget is, expenses you can cut include things like your cable bill or (gasp!) your Netflix subscription. These little luxury subscriptions add up.
Also, see if you can negotiate with your landlord, mortgage company, or other creditors, who may now be required by law to be more flexible because of the pandemic. The Federal Housing Authority, for example, has put a moratorium on foreclosures and evictions on mortgages that it has backed.
One thing you should avoid is taking out any risky loans, like borrowing money against the value of your home (which is costly in terms of interest and fees). Also avoid products from potentially predatory lenders, such as payday loans that have sneaky clauses in the fine print.
When the COVID-19 crisis is over and the economy rebounds, consider preparing for the next financial downturn by saving an emergency fund. Many financial advisors recommend saving three to six months of pay in case of a layoff, furlough, or other financial emergencies. Saving an emergency fund can be difficult but, as this pandemic has shown, it should be a priority.
Making the Best of It
The coronavirus pandemic has wreaked havoc on the U.S. economy and one of the results has been a massive amount of employee furloughs. A furlough is meant to be temporary, but because of the pandemic, no one is quite sure when businesses will resume normal operations.
A furlough is tough, but there are some silver linings: workers who are furloughed still technically have a job, they may be able to continue receiving health insurance benefits and, thanks to new laws, they may also be able to collect unemployment while on furlough. Finding out what the conditions of the furlough are from your company is important, as is taking a closer look at your finances and sticking to your budget.
If you’re in a decent financial situation, it’s best not to treat a furlough like a holiday. Use the time off wisely and continue to network and update your resume. While on furlough, you can also look for free or low-cost career training seminars or online classes. Look for ways to continue advancing your career, whether it’s learning new skills, doing remote volunteer work, or building your professional brand on LinkedIn.
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Maria Gold is a Content Manager/Writer for Empire Resume. She is dedicated to helping educate and motivate people with the latest career articles and job search advice. Her interests range from writing to programming and design. She is also passionate about innovation, entrepreneurship, and technology.