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The Difference Between Being Laid Off and Being Furloughed

Knowing the difference between being laid off and being furloughed can provide insight into your available job options.

The term “furloughed” has been thrown around with reckless abandon since the COVID-19 pandemic caused companies to cut their workforces. But just because the media has a new buzz word doesn’t mean they ever define it. Therefore, the onus of learning the difference between being laid off and being furloughed is entirely on your shoulders. Here is an in-depth breakdown of the two terms, and what they might mean for you right now and in the future.

The Difference Between Being Laid Off and Being Furloughed

So what’s the difference between being laid off and being furloughed? Here are the definitions of each term and what often causes each scenario.

Being Laid Off

Being laid off is a permanent separation between employer and employee for various reasons (both internal and external). These aren’t the fault of the employee. In a vast majority of instances, the laid-off individual finds a job elsewhere and rarely comes back to their employer. The causes of layoffs vary, but may include one or more of the following:

  • Reducing costs to increase the bottom line; most companies lay off workers first before cutting other costs
  • Lack of budget funding
  • Mergers
  • Outsourcing
  • Loss of work, projects, or clients
  • Company relocation

Laid-off workers can collect unemployment benefits while they look for work. Plus, they also have access to unemployment placement programs. In some instances, companies drastically reduce the hours of their employees to cut costs. As a result, employees may request a layoff because unemployment benefits end up paying more than part-time employment.

Being Furloughed

Although some people use furloughed and laid off interchangeably, furloughed is a different term altogether. Being furloughed is a temporary unpaid leave that’s mandated by an employer to cut costs during times of economic hardship or other unforeseen events. Recently, the COVID-19 pandemic and resulting quarantine have drastically reduced the revenue and profitability of companies, causing the need for extreme cost-cutting activities. Regardless of the situation, employers may furlough some or all of their employees to maintain temporary operations or stay financially afloat in the meantime.

Employers usually plan to bring their furloughed employees back to work at some point, although the time frame is uncertain. However, employers can’t restrict employees from applying to other jobs. In addition, they can also collect unemployment benefits, and they may also use benefits from their job if their health plan and retirement plan allows it.

What You Can Expect When You’re Furloughed

According to a report from The Washington Post, 77% of workers who have lost their job during COVID-19 have been furloughed. While that statistic might provide some hope that employees will return to work, others aren’t nearly as optimistic. Experts warn that up to 40% of the 40 million unemployed Americans will have no job to return to. Based on these projections, no furloughed employee’s job is safe, even with the promises of employers. 

Is Your Job Still Secure?

In short, no. As mentioned above, the uncertainty of employment for furloughed workers remains even after state governments loosen their restrictions. If companies can’t recoup revenue or pay their debtors, they may have to introduce a round of layoffs. Typically, larger companies will conduct layoffs more readily because of their obligation to shareholders. However, these companies are also more likely to provide some sort of severance package.

What You Can Do

Because your employment future is uncertain, don’t just collect unemployment benefits and wait for the call to return to work. Be proactive. This doesn’t necessarily mean that you have to apply for 10 jobs every day. Just make sure to use your time wisely. Take a few courses, earn a certification, or improve your online presence to improve your chances of finding a remote job. After all, virtual employment is quickly becoming the wave of the future.

And don’t forget that it’s perfectly okay to hang out with loved ones, relax for a few days, or do some work around the house. Just don’t get too complacent. Otherwise, you might find a nerve-wracking situation become even more stressful after unemployment runs out.

What Is the Typical Length of a Furlough?

The length of furloughs varies greatly. Prior to COVID-19, many workers experienced furloughs. For example, lawn care companies might furlough workers during the winter. Or bus drivers might experience a furlough over the summer. Numerous times, the government furloughed employees after government shutdowns.

Unfortunately, due to the nature of the COVID-19 pandemic and the lack of knowledge about the future of the virus, the length of most furloughs are unknown. The anticipated second wave of COVID-19 could extend furloughs indefinitely, even as companies make plans to bring people back to work. Remember that furloughs aren’t a binding contract; they’re merely the intention of the employer. Thus, your employer can still lay you off at any time during the furloughed period.

What You Can Do

Most experts advise that you continue to look for work during your furlough, especially if the length is unknown. As mentioned above, you can work on your professional skills, spend the time with family, or some combination of the two. The last thing you want to do is come out of furlough with no job and no hope for the future. 

What Benefits Do Furloughed Employees Get?

In most cases, furloughed employees have the right to collect unemployment benefits. Through the end of July 2020, this allows furloughed employees to collect their weekly state unemployment amount plus an additional $600 per week from the federal CARES Act. Most companies also allow you to continue to use your health benefits for a predetermined amount of time. Employers such as Disney also permitted their furloughed workers to take vacation days to offset the potential loss of income.

What You Can Do

File for unemployment immediately. Through the end of July, you can max out your potential weekly monetary benefits. After that, you can only collect unemployment at the state level, meaning you’ll lose the extra $600. Additionally, the CARES Act allows states to extend unemployment benefits by an extra 13 weeks, but there’s no certainty as to what states will follow suit.

Remember that you can also pull money out of your 401(k) to cover expenses, but think long and hard before you do. Unless you’re 59-½ years old or older, you’ll have to pay a 10% early withdrawal penalty on top of income tax. That means that you can take a large chunk out of your future retirement—something you surely don’t want to do if you can avoid it.

What’s the Etiquette Regarding Job Searches?

Since you have no certainty if or when you’ll return to your job, searching for other types of employment is perfectly acceptable on a social and professional level. The only caveat is that if you find a job, the etiquette is to tell your employer. Not only is it a general courtesy, but telling them gives your employer time to find a replacement or alter their budget accordingly.

What You Can Do

Hit the pavement (or the virtual pavement), and try to find a job that speaks to your interests and aspirations. While you may have experience in a certain industry, the COVID-19 pandemic gives you time to reconsider where and how you want to work.

Do you want to work from home? Are you considering a career change? Which of your current skills and experience are transferable to another job? Only you can answer these questions, but doing so can improve your opportunity for employment in the future.

How Remote Work Can Prevent Furloughs and Layoffs

In an uncertain world full of layoffs, furloughs, economic downturns, and changing fads, remote work is the great equalizer. During the COVID-19 pandemic, many employers turned to virtual work as a way to maintain their operations. Coupled with the unpredictability in the near future, telecommuting might just become a regular—if not more popular—form of employment. They also reduce overhead in the form of reduced brick-and-mortar costs such as heating, cooling, and leases.

Remote Work as a Freelancer or Contractor

Remote work is also a type of work that can allow you to become your own boss. That’s a huge deal when it comes to layoffs and furloughs. Not only can you choose your own clients, but you also have a say in when you work. You’re also not at the mercy of another company that must pledge their allegiance to creditors or shareholders.

As a freelancer or contractor, you have the ability to get constant work if you have the drive and discipline to do so. Once you find a way to market yourself to employers, you can choose the amount of work you want to do. While situations like COVID-19 may cause a bit of a downward spiral in your earnings, you’re still in control of the situation. Conversely, working for an employer means that they control the amount of work you have and when you work. In an ideal situation, this isn’t a problem, but as COVID-19 has shown, the employment world is a very volatile place. 

Why Being Furloughed or Laid Off Is Important to Discuss

Hopefully, you’ll never have to handle the stress of being furloughed or laid off after the curve flattens, and the COVID-19 pandemic moves into the rear view. But the world has a way of creating constant uncertainty and repeating itself. However, knowing the difference between being laid off and being furloughed can help you create a contingency plan and know your options moving forward. Armed with this information, you can hop out of the unemployment line, create opportunities, and get back to work.


Do you have tips on how to overcome a furlough or a layoffConnect with Virtual Vocations on FacebookTwitter, and LinkedIn to share your advice. We’d love to hear from you! 

iStock Image: Khosrork

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