What employers need to know about furlough vs layoff
Performance 4 minute read

What employers need to know about furlough vs layoff

Andra Mircioiu | May 12, 2020

As businesses work on recovering from the financial crisis caused by COVID-19, it’s essential that HR and leaders know the difference between employee furlough vs layoff. Ensure that you are following the guidelines and legal requirements of your area.

In recent weeks, Google searches for keywords such as “what is furlough” and “furlough vs layoff” and “temporary layoff” have skyrocketed as the COVID-19 pandemic continues to cause significant downturn in global economies. 

Google refers to the search terms above (and similar ones) as breakouts, which means that each search term grew by more than 5000% when compared to the same period last year. 

Governments have begun introducing plans to restart local economies in phases⁠—but some organizations may be forced to still make difficult decisions in the coming weeks to remain solvent, including further reducing headcount. 

Borrowed from the armed services, to furlough someone means to grant them a leave of absence.

Furlough is frequently used in the UK and USA; in Canada, it’s more commonly referred to as a ‘temporary layoff’. 

Unlike a permanent layoff (which is the layoff referenced in the Google search term “furlough vs layoff”), a temporary layoff pauses—instead of terminating—the employee/employer relationship. 

Generally, a temporary layoff can only last for a number of weeks. Anything over that, and the layoff is treated as a permanent layoff and employers are legally required to provide notice of termination, severance pay and final wages. 

For example, in British Columbia, a temporary layoff can only last 13 weeks or fewer, which has now been extended to 16 weeks during the COVID-19 pandemic to match up with the Canada Emergency Response Benefit (CERB). 

Some provinces require notice for temporary layoffs; other provinces don’t. We highly recommend consulting an employment lawyer for particulars if your organization is considering temporary layoffs or any other cost-cutting measures that may involve and affect your employees. 

If you want to scale down operations without resorting to temporary layoffs, you can consider: pay reductions or reduced work hours. 

As an alternative to layoffs, pay reductions (or pay cuts) generally have strong support from your employees—especially when pay reductions happen across the entire organization and include leadership roles too. 

Typically, pay reductions happen by percentage, i.e. future earnings will be temporarily cut by 20% for a specified period of time. However, you might want to consider a proportional pay reduction to ensure that your lowest paid employees continue to earn a living wage

Pay reductions can’t be supplemented by employment insurance (EI) benefits or CERB so you might find that some of your lower-paid employees may opt for a temporary layoff to qualify for unemployment benefits instead of taking a pay cut. 

Another alternative to furloughs is reducing work hours. Having employees work fewer hours or days, for example switching to 3 days or 4 days a week, keeps everyone’s pay rates intact. Ask your HR department and managers/team leads for insights into which teams or employees could reduce their hours without compromising essential operations. 

Whether you’ve decided to furlough a number of your employees and/or opted for a pay reduction or reducing work hours, it’s important to communicate updates to your workforce as frequently as possible. 

Your HR department can help you craft messaging that continues to keep everyone informed on intended return-to-work timelines and next steps. 

Ask managers or team leads to continue holding video team meetings and 1:1s with any remaining employees to ensure that the workload is prioritized accordingly and everyone has the necessary resources to remain productive. 

We’ve said it before but it bears repeating: Please consult an employment lawyer before you make any decisions on staff reductions. 

An employment lawyer can advise you on local jurisdiction and help you navigate employment standards legislation. As an example, while B.C. converts a temporary layoff to a permanent one after 13 weeks (now temporarily 16), Alberta has a slightly longer timeline of 60 days (now 120). 

Your employment lawyer can also review contracts or other documents pertaining to the employees you’re considering laying off—and flag any potential issues that you might miss.

 

Give your employees, and yourself, the experience we all deserve.

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