Why would a company furlough instead of lay off?

Question

Zippia Team · Accepted Answer

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.