During times of economic downturn, companies take drastic measures to ensure their longevity.
Oftentimes, this could involve a reduction in their workforce, selling off of business entities, and even pivoting their business focus to more income-generating activities. No matter how it’s handled, the impact of a down economy can be devastating to both businesses and the people that they employ.
One way that businesses navigate these tough times is through furloughing employees.
If you’ve been furloughed, you probably have tons of questions.
What exactly is it? What does it mean for your finances? What are your options?
Here’s what you should know about getting a furlough from work.
What does a furlough mean?
A furlough is a temporary, unpaid leave of absence from a job.
Companies often place employees on furlough to help reduce their financial burden during times of economic or business hardship.
A business may choose furlough as an alternative to layoffs because they anticipate a positive change in their financial situation at a later date.
By not laying off employees, they are able to quickly ramp back up to normal operations when the furlough has ended and they are back in good financial standing. During this time, your position is still retained with the company; however, you will not work or receive any pay for a set period of time.
There is no standard length of time that a furlough lasts. This is determined by your employer and will be communicated to you.
Ideally, after the period of furlough, you will return to work and resume receiving your previous pay.
It is also worth noting that furloughs aren’t always a sign of financial hardship.
Many manufacturing companies have shutdown weeks designated to maintenance equipment. During this time, some employees may be put on furlough.
Is a furlough the same as being laid off?
It is important to distinguish a furlough from a layoff. A furlough is not that same as being laid off.
Being laid off indicates permanent separation from your employer, whereas with a furlough you are still employed, although unpaid.
Though some layoffs may result in rehiring, it is usually unlikely and not guaranteed. Contrarily, with a furlough, your job is retained and the expectation is that you will resume work in the future.
Additionally, each of these forms of unemployment has its own financial implications. For example, an employee who is laid off may receive a severance package.
A severance package is financial pay and benefits given to an employee when they are laid off. This can include payout for unused vacation or paid time off (PTO), payment for each year of service with the company, and even assistance with finding new employment.
Not all companies extend a severance package and what is included varies.
An employee who has been furloughed will not receive severance.
Will you retain health insurance and other work benefits?
Unlike employees who have been laid off, if you are a furloughed employee, in general, you will still be able to maintain your health insurance and other work benefits.
Under normal employment circumstances, your contribution to your health care costs would be taken out of your paycheck. However, since you are no longer being paid, you may be obligated to make payments either during or after your furlough.
It’s important to speak with your employer to find out what you will be responsible for, if anything, and when it will need to be paid.
Can you file for unemployment benefits?
Though the requirements to receive unemployment benefits vary by state, the general qualifications include:
- Unemployment or reduced work at no fault of your own
- Meeting state requirements for job tenure and wages
- Being available and able to work and actively seeking employment
The decision to approve or deny unemployment benefits is determined on a case-by-case basis within your respective state.
However, in extreme cases of a national or global economic crisis, the federal government may waive requirements to receive benefits.
In that instance, states that previously did not allow for furloughed employees to receive unemployment may then extend those benefits.
What to do if you’ve been furloughed
Talk to your employer about the details: If you have been furloughed from work, it’s important that you discuss the details with your employer. Typically, communications will come from your human resource department, so that is where you should direct your questions.
Find out if you will be eligible for unemployment benefits and how your health insurance and other work benefits will be impacted, if at all.
Be sure to get all of these details in writing for future reference.
Reduce expenses: A job loss, whether temporary or permanent, can have a significant impact on your finances if you aren’t prepared.
Once you have been notified of a furlough, you should immediately begin reducing your expenses. This means cutting any discretionary spending and saving those funds to cover necessities.
If necessary, begin contacting your service providers and lenders to inform them of your change in employment. They may be willing to work with you to create a modified or deferred payment plan.
Supplement your income: In addition to reducing your expenses, you will also need to find ways to supplement, or replace, your income. (Though you will want to check how earning extra income impacts any unemployment benefits you receive).
Furloughs can last for many months, and not having income during that time may not be sustainable for your financial situation.
As a furloughed employee, you always retain the right to seek employment elsewhere. So, if you are able to find work within your field with another employer, take advantage of it!
However, if you would like to continue your career with your current employer, then finding work for the duration of your furlough is also an option.
Below are a few ways that you can supplement your income if you’re furloughed.
How to supplement your income if you're furloughed
Sell stuff: The first place that you can look for additional income is your home. What unused items can you sell?
Having a yard sale or selling items through online marketplaces is an option to make cash quickly without any upfront investment. Sift through your closet, cupboards, and drawers to see what you can sell.
Offer personal services: There is always an opportunity to make money by offering personal services to people. This can include:
- Food delivery
- Grocery shopping
- Personal assistance
- Baby sitting
- Dog walking/sitting
- Home cleaning
The amount of opportunities are endless. Sites like TaskRabbit allow you to safely find work doing everyday tasks.
Freelance online: Another way to supplement your income is through online freelancing opportunities.
Freelance opportunities can range from writing, editing, graphic design, to even offering virtual assistance services. The opportunities for work are endless.
Explore freelance marketplaces like Fiverr and Upwork to see what kind of services are being offered and requested. You can create a profile and begin offering services of your own to customers all over the world.
Job furloughs can be scary
No matter what current economic conditions may be, a temporary loss in income can be paralyzing. The one thing that can help ease that anxiety is being equipped with information.
If you have been impacted by layoffs or furloughs, you can find additional information specific to your state at Career One Stop.