Reduce the Impact of Your Furlough by Planning Ahead

Sometimes a furlough is necessary for business. Perhaps it’s necessary due to a tough economy, seasonality in your business, or a catastrophic event. Knowing that you’re susceptible to furloughs and creating a plan to address the possibility is a smart move.

What is a Furlough?

A furlough is a temporary unpaid leave of absence, usually implemented by an employer to save money or due to seasonal shutdown. It provides the ability to maintain lower costs during a specific period of time in which the employer is not required to pay wages.

Furloughs can vary in duration, payments, and whether or not they are voluntary.  However, they are always temporary, infrequent, and directed by the employer.

Each state is different and has their own policies on how to address a furlough. While all states require some form of advance notice before implementing a mandatory furlough, some states require a specific notice period, and some require written notice. It is important to know the notice requirements for each state that you run a business in.

Create a Furlough Plan

Thinking about how you’d go about a furlough before you actually need to implement one is good stewardship. As you create your plan, consider the following:

  1. Communication: How will you communicate the furlough? Will you have managers address individuals or will you hold a company meeting?
  2. Instructions: Write down instructions for managers and employees that include what’s acceptable or not. You may want to explicitly prohibit exempt employees from working. Exempt employees compensated on a salary basis as defined by 29 CFR §541.602, may trigger a minimum $455 payment if they work for even a few minutes during a furlough week. Triggering a minimum payment may make a tough situation worse.
  3. Procedures: Create procedures that detail activities before, during and after the furlough. Remember to explain how the furlough will work including how and when employees should return to work.

Employees Filing for Unemployment Benefits

Sometimes employees will file for unemployment benefits while on furlough. In some cases, you may not want to deny unemployment benefits because your intention is for them to come back to work rather than seek employment elsewhere.

Unfortunately, when you don’t deny an unemployment claim, you may find that you’re no longer an interested party. If you’re not a party to the unemployment claim, it’s difficult to reconcile discrepancies with your state.

Not everyone that’s furloughed will apply for benefits, but you should be aware of the costs associated with it. You may consider alternatives like having employees use paid time off, accrued vacation time, reduced work weeks, reduce wages across the board, or start the process of changing certain positions to hourly.

Although furloughs may be necessary, you can reduce the impact on your organization’s bottom line with proper planning. Let us help you create a plan that’s based on stewardship. For a comprehensive strategy to reduce the impact of furloughs in your organization, give us a contact us at (972) 984-5275.