The Difference Between a Furlough and a Layoff

Furlough vs layoff: definition and difference (box of desk belongings) — Photo: Getty Images

When you're losing your job, the language your employer or boss uses may not seem important, but there are different types of job loss. Often, terms like layoff and furlough are used interchangeably, but they do have meaningful differences, especially when it comes to your job in the future and your ability to receive unemployment benefits.

With the coronavirus crisis sparking an enormous spike in unemployment, many, many people—jobless claims in the U.S. were at more than 40 million in January 2021—are experiencing job loss. Some people are getting their hours or pay cut; others are being let go altogether. With so many people experiencing these negative changes, it's nearly guaranteed that you or someone you know will also be affected (if it hasn't happened already) before economic conditions turn around. Keeping that in mind, it's important to understand what kind of job loss is happening, and that's where the difference between getting furloughed and getting laid off comes in.

To understand the differences and definitions of furlough and layoff, Real Simple spoke with Brittney Castro, CFP at Mint, for the information anyone experiencing a job loss or seeking to support someone through a job loss should know.

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Layoff definition

Unlike getting fired for poor performance or behavioral issues, getting laid off means, simply, that your job position has been eliminated. This might happen when a business closes a store or restaurant location for financial reasons. (A layoff can become a reduction in force, or RIF, if the company has no plans to replace the individuals laid off and will operate with a reduced staff.) Layoffs are relatively common: Depending on what industry you work in, layoffs might be an annual event.

If you get laid off, you are eligible for unemployment benefits, Castro says, and you lose access to employer-provided benefits, such as health insurance.

Layoffs are considered permanent. If your company were to reopen any eliminated positions and wanted you to fill one of them, they would have to go through the process of rehiring you. For that reason, layoffs can be more complicated and expensive for companies, Castro says, because they have to go through the hiring process to bring back any employees.

Depending on the terms of your layoff, you may receive a severance package, which could include a certain number of weeks of pay beyond your last day at work or extended healthcare benefits. If your employer offers a severance package, pay careful attention to its terms and details.

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Furlough definition

A furlough is when a company temporarily pauses employment. Furloughs might be less familiar to you than layoffs, but they do happen, especially during COVID-19, when many businesses have been forced to close their doors for an unknown length of time. If you are furloughed, you are still an employee of the company, but you do not work and are not paid.

Sometimes, furloughs can be partial: You may only work four days a week (and be paid for only four) instead of five, so you would lose income, but you would not stop working completely. Some companies furlough employees by mandating that everyone take a certain amount of unpaid time off. This can lower operating costs for the company without forcing anyone to completely lose income.

Typically, furloughs are temporary: Most companies who furlough employees intend to bring them back to work at their previous hours and pay in the near future, usually when economic or business conditions improve. (During coronavirus, this might be when stores, restaurants, and other non-essential businesses are able to reopen fully.) This isn't definite, though. During a furlough, a business can decide to layoff furloughed employees, Castro says.

If you are furloughed and brought back to work later, you usually return to the same position and the same pay, Castro says. (It would be as though you took an extended, no-pay vacation.) Depending on the terms of your furlough, you may still have access to your company's health insurance and other benefits, but that's not always true.

When you're furloughed, whether you qualify for unemployment benefits depends on your state, though usually furloughed employees do qualify, Castro says. If you've been furloughed, check with your state's unemployment office to see if you qualify for benefits.

Furloughs can be easier and more affordable for businesses because they don't have to rehire employees when conditions improve. The hiring process takes time and money, and furloughing employees instead of laying them off lets employers avoid it.

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The difference between a furlough and a layoff

Essentially, a furlough is temporary and a layoff is permanent. There are more details and every situation is different, especially with regards to employer-provided benefits, but if you experience a layoff, your job is gone and you will need to find other work. If you are furloughed, your job and pay are still there, waiting for you. (Just remember that a furlough can turn into a layoff if conditions worsen.)

If you are furloughed, whether you begin searching for other jobs is up to you. Before you start the job hunt, though, consider how much you like your job, whether you'll be able to find a comparable job, and the likelihood of your company ending your furlough. If you're furloughed for a short time or asked to take a certain amount of unpaid time off, staying with your job is likely preferable to looking for a new one. Depending on the conditions of your furlough, it may be in your best interest to search for a new job, but only you can make that decision.

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