During business slumps and economic recessions, enterprises go into survival mode. They will execute multiple strategies to keep the company thriving amidst financial crises. One way to do just that is to devise cost-saving plans to cut business expenses without compromising the acquired talent and human capital. So instead of laying off employees, firms resort to temporarily suspending workers from their jobs without pay—an approach called furlough. In this article, we will be tackling more about furloughed employees.
In business, furlough refers to the process of temporarily laying off employees from their work due to a declining economy or business condition. It is a mandatory but unpaid cessation of employment. However, companies are still liable to pay furloughed employees tax such as pension contributions unless the worker opts to stop it. Employers should also retain employee rights, such as statutory sick pay, maternity rights, fair dismissal, and redundancy payment.
Firms may subject workers to mandated, temporary leaves whether they work full-time to part-time. They can furloughed employees, agency workers, labourers on zero-hour contracts, and apprentices. They can also furlough workers who are unable to work due to circumstances such as childcare responsibilities, shielding individuals, or caring for a seriously ill family member.
Instead of laying workers off, private or public employers may impose it as a cost-cutting measure to keep the business afloat regardless of economic pains. Private companies may also opt to do it during their short-term seasonal downtimes.
For example, a resort will reduce its workforce during the months of the winter season.
For the federal government, furloughs happen when they fail to pass a budget for the next fiscal year’s spending. Without a budget, government agencies cannot afford to pay for employees and continue their prospective work.
Under the Fair Labor Standards Act, furloughed workers have two statuses, namely:
This pertains to employees who receive monthly salaries in line with the government’s annual income threshold. They are exempted from overtime pay regardless of the number of hours they render at work. Companies should be careful in furloughing exempt workers because, according to FLSA, they cannot reduce their pay for a reduced hour of work.
To comply, FLSA requires employers to furlough exempt employees in full-week increments without pay. During this circumstance, workers are in a zero-tolerance policy, meaning they are not allowed to work from home, get called for troubleshooting, and even do as little as answer an email.
Non-exempt employees are those who have non-managerial roles with an hourly basis wage. They are also entitled to overtime pay based on the hours they rendered. FLSA determines this status depending on a worker’s job duties and their salary threshold for a week ($684).
The government allows firms to furlough non-exempt workers by modifying or reducing the hours of their work. They may put them on a zero-hour schedule, but they cannot reduce their wage to less than the government-mandated minimum.
They may be unpaid, but workers still get to have their furloughed employees benefits such as health and other insurances. Some firms also allow workers to seek part-time jobs during temporary leaves. They can also partake in organizational work and training.
Depending on their state, labourers can apply for unemployment benefits during their time without pay. However, once they resumed their job, they may be liable to pay back any unemployment benefits they collected.
In special cases, like the Job Furloughing Scheme we have in line with the Coronavirus, the government can offer to cover 80% of furloughed employees’ salaries (capped at £2500), so that they can still receive wages despite being temporarily laid off.
Specific rules and regulations bound furloughs. It is best to understand what it entails to protect your rights during such dire times. Be sure to tune in on the next episode of Uncover Wealth Radio. Please give me a hello when you do or drop by on our Instagram!