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Furloughed vs. Laid Off…What’s the Difference?

Fired Caucasian businessman carrying personal belongings

In a wobbly economy or uncertain job market, the terms “furloughs” and “layoffs” are common. But just because we’ve heard the terms doesn’t mean we understand them. Here, we break down what it means to be furloughed or laid-off so that you’ll be prepared if those words get personal.

A furlough is a temporary, mandated, unpaid leave, explains Eric Mochnacz, a consultant at Red Clover, one in which the expectation is that the employee will be able to come back to work at some point in time. Many employers will continue to provide health benefits to employees, who can also apply for unemployment benefits, such as compensation. Furloughed employees aren’t locked out of their jobs, either: They can apply for other jobs. “But if they do accept another position, they would need to inform their current employer,” Mochnacz explains. “Once they resign, they obviously would not be eligible to receive the continued health benefits and, traditionally, when one resigns from a position, they would not be eligible for [continued] unemployment benefits.”

Furloughs, then, offer some advantages. “While no one wants to be out of work, a furlough gets worker unemployment—which, right now, unemployment is nothing,” says Kate Bischoff, attorney and HR consultant at tHRive Law & Consulting. And yet, furloughs aren’t without their disadvantages, too. “You’re out of work in a scary time with no real assurance that you’ll be able to go back to a job you likely fought for,” a scary prospect for many employees, Bischoff says.

However, she adds, “Many employers who furlough workers are trying to keep in contact with them, sharing as much information as they can about their status and when things could start up again.”

A layoff, in contrast to a furlough, is a complete separation from the employer. “A layoff is not temporary, and there’s no real assurance that the individual employee will be brought back into the company,” Bischoff says, adding it’s much less likely to be brought back to a job after being laid off than it is after being furloughed. “And because it’s a total separation from the company, laid-off workers will not receive any benefits from their previous employer,” explains Mochnacz.

However, laid-off employees can and should apply for unemployment benefits—as well as start searching for a new job in their chosen field or a new industry. “Workers who have been laid off can evaluate whether they want to switch employers or careers at this point,” Bischoff says.

Unfortunately, Bischoff and Mochnacz agree, there aren’t many advantages to being laid off.

But that doesn’t mean a layoff is all bad. Sometimes, when businesses face reduced revenue—or are forced to close due to unforeseen circumstances—layoffs are a way to make the best of a bad situation, Mochnacz says. “In the work, we do for our consulting firm, we work with several small businesses with hourly workforces,” he says. “They’ve chosen to do a reduction of hours to maintain business operations, and with that reduction, some of the hourly employees have requested to be laid off, because collecting unemployment would be a better option for them and provide more financial support than working a day or two at their current wage rate. In that case, a lay off may be more beneficial to the employee, and the employer may choose to lay them off.”

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