Many businesses found themselves having to make tough decisions in order to stay afloat during the coronavirus pandemic. For those lucky enough to remain in business, perhaps the most difficult one was having to let valuable employees go.
Applying for a Paycheck Protection Program (PPP) loan under the CARES Act complicated the decision. While PPP loans provided much-needed relief to struggling businesses, employers had to weigh their options: reduce their workforce or have their loan fully forgiven. Unfortunately, retaining all employees wasn’t always in their best interest.
Furloughs, layoffs, and terminations are unique and have different distinctions. Here we break it down.
Layoffs and furloughs are separations in the employment relationship that are usually a result of limited finances on the part of the employer, whereas terminations are generally isolated and are based on an employee’s performance.
This type of separation typically occurs because there is no work for the employee to perform. While layoffs are usually permanent, they can be temporary depending upon the industry. For example, thousands of seasonal workers at the Jersey shore are laid off each year but return for the next summer season.
An alternative to layoffs, a furlough is a mandatory suspension without pay that is temporary. Employees may need to cut their hours per day or week, or take a certain amount of time off as unpaid.
Unlike laid-off workers, furloughed workers are still employed. While they no longer are paid, they may be entitled to health insurance, in addition to unemployment benefits, depending upon the length of the furlough. Read more about it here.
The Road to Recovery
The time may come when you need to welcome back employees, whether they were laid-off, furloughed or even terminated. While it’s cause for celebration, there are things you must consider.
You’re likely familiar with the term onboarding—the process of integrating a new employee into a company and its culture. It involves the completion of necessary paperwork and the dissemination of tools and information needed to become a productive member of the team.
Appropriately named, reboarding refers to the onboarding of re-hired employees.
Since furloughing is an unpaid leave of absence, there isn’t much for the employer to do beyond reinstating benefits. If benefits were able to be continued, and the employee did not prepay or pay their portion while on furlough, the cost of the premiums need to be collected upon return from the furlough. If benefits were not continued, then COBRA ends and the employee needs to be reactivated on benefits.
Laid-off or terminated employees will need to complete new employee paperwork. Fortunately technology can help streamline this process. When an employee is removed from payroll, Balance Point’s HCM solution provides the option to maintain the history record of the employee’s previous employment with your company and the termination date.
When it’s time for the employee to be reboarded, the fields will populate with the employee’s prior information for them to review and resubmit.
Weighing the Options
In short, the main difference between layoffs and furloughs is that layoffs are likely indefinite, while furloughs are relatively short-term. If you are unsure which option is best for your organization, it is best to consult with your trusted HR and business advisors.