The pandemic does not only affect the health and safety of society. It is also crippling the economy of all countries, hurting the livelihood of millions. The mandatory cancellations, distancing, and lockdowns are not conducive for most businesses. To keep their ventures afloat, companies do not have any other options than to furloughed workers and lay off employees.
The word “furlough” has not been a part of our everyday vocabulary, not until the businesses decided to furlough their workers as a way to salvage their collapsing companies. So if you are one of the thousands of employees furloughed from work, here is some necessary information to understand what it entails on being furloughed workers.
Furlough is a mandatory yet temporary unpaid leave from work for a set period. This means that employees RETAIN their jobs but would not be able to DO their jobs and get paid. During temporary leaves, employees are not paid, but they get to keep their company benefits such as health insurance and medical leaves.
Furloughs happen for multiple reasons, such as:
- Government shutdowns where only essential workers are allowed to work
- Recessions or seasonal downturns
- Broad reorganization of employees
- Plant shutdowns or slow business periods
What does it mean to be furloughed workers?
Mandatory unpaid leaves are less permanent solutions than layoffs. The latter entails a permanent cessation of employment, whereas furloughs are only temporary and usually last for a limited time only. When conditions improve, employees will be called back to resume their work.
During temporary layoffs, employers may adopt different furloughing strategies such as:
- Rotation of unpaid leaves between workers
- Temporary cessation of employment for non-essential workers only
- Cutting back work hours or taking one unpaid day off per week
- Furloughing employees for several weeks or months
Furloughed workers are legally allowed to look for a new job even though he is still employed to his/her former employer. In some states, these workers are also eligible to apply for unemployment insurance together with freelancers, part-time workers, and independent contractors. They can also take part in training or do volunteer work for another organization.
Employers must not ask furloughed employees to do any work for them, especially when it involves services that will cause a company or an organization linked to it to earn a profit. This is a zero-tolerance policy. This means that a small service such as a 5-minute phone call to a client is prohibited.
Furlough Workers in the United Kingdom
Currently, 8.4 million labourers have been temporarily laid off from work since March. To help furloughed workers and individuals during these trying times, the government created a Coronavirus Job Retention Scheme program. This program aims to aid people on leave by keeping them on their company’s payroll, allowing the government to pay 80% of their salaries, which can reach up to £2,500 per month.
However, come July 1, firms can start bringing back temporarily laid-off workers to work part-time. Employers need to pay wages based on the rendered part-time hours, while the job retention scheme will cover the unpaid days of leave of the said employee.
On August 1, companies will shoulder their workers’ national insurance and pension contributions, while furloughed employees continue to receive 80% of their wages. But by the end of October, employers need to cover a fifth of their employees’ salaries.
Non-permanent unpaid leaves have severe implications for both employers and employees. It has its fair share of advantages and disadvantages to both parties. This cost-saving strategy is usually a last resort approach to cope with extreme situations such as deep recessions and pandemics.
Suppose you want to know more about the furlough scheme in relation to the Coronavirus. In that case, I’m inviting you to join my weekdays Podcast, Uncover Wealth Radio, and I can answer your questions in real-time and learn from the inquiries of other members of the community – Uncover Wealth Community. Do give me a hello when you decide to hop on!