What Is a Furlough, and How Should Your Contracting Business Use One?

As it becomes apparent that COVID-19 is going to be a problem in the U.S. for the next several months, many businesses are shifting from paid time off for workers to furloughs and even layoffs. While most business owners should consider this a last resort, it may be a requirement for some in order to ensure that they can still function once the limitations are lifted. A furlough is a specific term that has legal requirements behind it, so contracting businesses should be careful if they’re considering placing employees on furlough. Here are the basics and a few factors to keep in mind.

What Is Furlough?
Simply put, a furlough sits somewhere between having an employee on paid leave and laying them off. This is a particular process used by businesses when they need to cut back on their operating expenses, but they don’t necessarily want to send their workers looking for another job. In this case, employees are technically still a part of the company. They may still receive benefits like employee health insurance. They just aren’t getting paid. Many companies will put employees on furlough to shorten their payroll obligations. For example, a company that is still operating but facing financial troubles may furlough employees once a week or a couple of days a month.

Do Employees Get Paid During a Furlough?
There is some variability in the way that employers handle a furlough. In most cases, the point of the furlough is to dramatically decrease the company’s payroll expenses during some period of economic crisis. While the company is not paying furloughed workers either an hourly wage or a salary, these employees may be able to use paid leave to help cover the costs. This depends on the company and may also relate to state and federal guidelines.

Why Are Companies Using Furlough During the Pandemic?
With the recent changes to federal unemployment guidelines in response to COVID-19, furloughed workers have more options than they had before. As a general rule, workers who are still regular employees but are furloughed for certain periods may not qualify for unemployment compensation. The recent legislation guaranteeing an additional mount of federal unemployment allows many employees who were furloughed to successfully apply for and receive unemployment payments. For businesses that are strapped for cash while they cannot operate during the pandemic, this can be a way to help ensure that their employees still get paid in some form.

What Are the Limitations for Furloughed Employees?
While keeping employees as workers for the company without having to pay them sounds like the best of both worlds, there are quite a few limitations to businesses related to furloughed workers. Companies must compensate employees for the work that they do. This means that a furloughed worker is not obligated to provide any work for the company during the period that they are on furlough. They are not required to interact with clients, other employees or even respond to messages from their supervisors about work-related tasks. This barrier exists to prevent companies from putting workers on furlough as a way of getting free labor or work at a reduced cost.

How Can Contracting Businesses End a Furlough?
At some point, businesses will need to end the period of furlough. This is where the business owner must decide if they are going to attempt to bring their employees back into regular work, or proceed to layoffs. In most cases, employees are not required to stay available to work for a company when they have been furloughed. This means that a lot of workers may be actively looking for or have already found other jobs. Otherwise, the employer should send a notification clearly identifying when the furlough period ends.

Running a contracting business often involves making big decisions about what to do with employees. Understanding your options makes it easier. To begin building a career in construction, visit CSLS today!