What Is The Difference Between A Layoff And A Furlough?

By Jack Flynn
Nov. 27, 2022

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As the job market changes, companies usually have to change with it. This means furloughs and layoffs are common. While the terms are sometimes mistaken for each other, they have different meanings.

To help you understand the differences between the two terms, this article will go over the two meanings, go over the differences between them, and what some of your employee rights are when furloughed.

Key Takeaways:

  • A furlough is a temporary, unpaid period of leave from work that typically affects large groups of employees simultaneously.

  • A layoff is when a company lets an employee go because there is no longer any work for them at the company.

  • You can look for a job while furlough as long as it is not with the company that furloughed you.

  • A furlough is temporary while a layoff is permanent.

What Is The Difference Between A Layoff And A Furlough?

Furlough vs. Layoff Meaning

To have a better understanding of the differences, here are the meaning of both terms:

  1. Furlough

    A furlough is a temporary, unpaid period of leave from work that typically affects large groups of employees simultaneously. Businesses use furloughs during periods of uncertainty where it’s unclear which employees will be necessary.

    • Furloughs are often used in response to site closures, broad-scale corporate restructuring, or during periods of widespread economic uncertainty, like a global pandemic or a government shutdown.

    • The length of time a furlough lasts varies, as it can be as brief or as long as the employer wants. However, be aware that people who get furloughed are typically allowed to return to their job after this suspension period.

    • Keep in mind that companies consider furloughs to be mandatory. In general, even if you’re not paid during the furlough, you’ll still keep your employment benefits, such as health insurance. At the same time, you’ll be expected not to do anything work-related on behalf of your employer while you’re on furlough.

    • Especially during times of economic crisis, furloughs can come from both public and private institutions. These organizations choose to furlough employees as a cost-saving measure when they don’t want to lay people off, while also lacking the funds to pay everyone appropriately.

  2. Layoff

    When a company lays off an employee it means they are no longer an employee there. Being laid off also differs from being fired because there is lack of work available. Being fired is typically because of the employees performance at work.

    Some employers may reach out to laid off employees when there is work available for them in the future, but often times layoffs are permanent. Layoffs typically happen due to a financial struggle or economic disruption. Layoffs are the quickest and easiest way to reduce expenses for a company.

    In some cases, a company may offer a laid off employee a severance package, but there is no requirement that they have to. Severance packages can help with your own financial problems after a layoff or may help you stay on the company health insurance until you find another job or get your own insurance.

The Differences Between A Furlough and Layoff

If you’ve received a furlough, it’s easy to feel like you’ve been laid off or worry that you’ll have to start job hunting. However, there are a few key differences between furloughs and layoffs. These differences include:

  • You’ll be able to return to your job. Unlike being laid off, when you’re under furlough, there is an expectation that you’ll be able to return to work at your current company. Typically, your employer will give you a specific return date or outline the conditions that will allow you to return. In this way, you’re not fired and instead on leave without pay.

  • You get to keep your benefits. Even while you’re furloughed, you’ll retain your worker’s benefits. Most notably, you should have access to any health and life insurance during the furlough.

  • You still have employment rights. During a furlough, you cannot be fired or replaced without process. You still have your job, so you have a presumptive right to return to your current position if you choose to.

  • Furlough is less complicated. Laying off employees can be time-consuming and expensive because of the paperwork and due process required. On the other hand, when you’re furloughed, it’s a relatively simple process, and once able, you’ll be able to return with ease.

Remember that your employer doesn’t want to fire you. Instead, they may not be able to pay you, or current restrictions have required them to reduce the number of staff. By furloughing you, they’re indicating that they still want you to work for the company.

In addition, laying off multiple employees can be an extraordinary expense and disrupt the company. Not to mention the fact that the employer would have to rehire an entirely new staff. Instead, they opt to suspend the employees temporarily they wish to keep in the future.

Furlough: No Work Rule

Hearing that there’s a “no work rule” during furlough might fill you with panic at first, but remember that this rule usually only applies to the company you’re working for. This doesn’t mean that employers can’t enforce a rule stating that you can’t apply for other work as well, but the “no work rule” doesn’t automatically go that far.

Generally speaking, when you receive a furlough, you’ll be banned from doing anything work-related for your company. This is a zero-tolerance rule, as even a simple work-related phone call or email will be enough to break it.

Employers are serious about enforcing this rule because if an employee does any work while on furlough, they must pay them for working. Remember, they haven’t laid you off. Therefore, if an hourly employee works while on furlough, the employer must pay them for the time worked, and if a salaried employee works, they’ll be paid the equivalent of their salary for the entire day.

As a result, furloughed employees usually have access to work-related accounts revoked. Doing so prevents employees from triggering a payment obligation from the company.

What Are Your Employee Rights When Furloughed?

If the idea of not being able to work stresses you out, be aware that furloughed employees have the right to seek new employment. By putting you on furlough, your employer has accepted the risk that the process will cause you to find a job elsewhere.

  • Due to the financial strain caused by the nature of a furlough, many employees consider taking temporary jobs during the time they aren’t allowed to work for their current company. Before you consider this option, be sure to carefully research rules against outside employment and/or second jobs, as your employer is free to enforce these policies even during the furlough. This doesn’t mean that you can’t choose to leave your job in search of something more financially stable, but researching your company’s policies first is the best move.

  • If you’re a public employee struggling with the ongoing pandemic, the Office of Personnel Management has stated explicitly that “rules regarding outside employment continue to apply when an individual is furloughed.” With that in mind, you should consider your options. If you have finances built up, you may want to endure the furlough, but it’s okay to look for a different job if you need money now.

  • As a furloughed employee, you might also want to consider requesting unemployment benefits for your time without pay.

  • Even if the federal government has furloughed you, unemployment is provided by each individual state. It does not suffer a budgetary lapse in the case of a federal government shutdown. For many, receiving unemployment serves as a worthwhile option when trying to survive a furlough.

  • However, not every employee can pursue this option. Because unemployment varies per state, each state has individual rules for collecting unemployment. This includes potential waiting periods for collecting benefits and a requirement that the applicant shows an active job search.

  • Sometimes, one or both of these requirements may disqualify a furloughed worker. Regardless, you should still look into your state’s rules, as unemployment is often one of the best ways to maintain your current position, without risking financial ruin.

What Does Being Furloughed During a Pandemic Mean for You?

If you’re currently furloughed and concerned about your prospects during the pandemic, there are some things you should keep in mind. Whether you’re looking for a new job or applying for unemployment, remember that the government on the local, state, and federal levels can provide resources for workers like you.

Several states have provided extra COVID-19 stimulus money to their unemployment services and loosened the restrictions on applying for unemployment. To learn more, research your state’s unemployment website.

There has also been an influx of remote working positions, which you can research and apply for. Be mindful of your company’s furlough policies, but if you’re allowed to work, one of these remote positions can provide you with supplemental income.

Finally, If you’re a federal employee, Congress has historically paid all federal workers for the time they lost during a shutdown. Luckily, leadership from both the Democratic and the Republican parties in Congress has indicated that they will do so for the COVID-19 pandemic.

Furlough FAQ

  1. Do you get paid during a furlough?

    No, you do not get paid during a furlough. However, your employee benefits, like your employer-sponsored health insurance, remain intact during your furlough. Additionally, you may be eligible for unemployment insurance benefits while furloughed. Check with your state unemployment office to learn more details.

  2. What is the difference between a layoff and a furlough?

    The difference between a layoff and a furlough is that a layoff is permanent while a furlough is temporary. While there are some cases where a furlough ultimately results in a layoff, the expectation of a furlough is an eventual return to the same job.

  3. Why would a company furlough instead of lay off?

    A company would furlough instead of lay off employees if they felt that their economic troubles were temporary. A shortage of liquidity, uncertainty surrounding a government shutdown, or a global pandemic can force a company to reassess how essential each employee is for the immediate moment.

    Companies don’t want to lay off groups of employees if they can help it. Laying someone off typically involves paying a hefty severance package, as well as an increased tax burden for unemployment insurance drawn as a result of the layoffs. If you can’t afford to pay employees and attrition isn’t happening fast enough, then layoffs are a last resort.

    But if you lay off employees due to a temporary problem, you’ll incur all those costs, only to have to spend even more money to hire and train new employees. Furloughs are a much more prudent decision for companies facing short-term troubles.

  4. Can I look for a job while furloughed?

    Yes, you can look for a job while furloughed. Your employer may restrict you from working for a competitor, but most companies understand that you have a need to earn a living during your period of involuntary leave. Note that a temporary job might affect your eligibility for unemployment insurance or reduce the amount you receive from it.

Final Thoughts

Being furloughed can be a frustrating and nerve-racking process, especially if your current position serves as your financial lifeline.

Take a deep breath.

The best thing you can do is stay calm, research your current situation, and make a plan going forward. If you do that, you’ll get through the hardship of this pandemic, one step at a time.

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Jack Flynn

Jack Flynn is a writer for Zippia. In his professional career he’s written over 100 research papers, articles and blog posts. Some of his most popular published works include his writing about economic terms and research into job classifications. Jack received his BS from Hampshire College.

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