Employee furloughs are a positive alternative to layoffs, but they have negative consequences, too. Employee furloughs are mandatory time off work with no pay. Used as an alternative to a layoff, employee furloughs can occur in both public and private sector organizations when revenue or projected revenue fails to match expenses. Revenue is generated through product sales, grants, and governmental support and subsidies.
In mandatory employee furloughs, employees take unpaid or partially paid time off of work for periods of time. The employees generally have either scheduled time off or call back rights and expectations. To schedule employees with a contract, including union-represented employees, for employee furloughs, the contract must be renegotiated. The negotiations about employee furloughs generally include a call-back date.
Examples of employee furloughs include closing a business for two weeks, reducing employee time on the job to three weeks a month instead of four, and asking employees to take two days a month off without pay. Other employees have been put on furloughs indefinitely.
During employee furloughs, benefits usually continue, which is one of the employee furlough's differentiating factors from a layoff.
Some states have implemented work sharing programs. Work sharing is an Unemployment Insurance (UI) program that allows an employer to reduce the number of hours an employee works during a week while unemployment compensation makes up some of the difference in income.
When the Federal or state governments implement employee furloughs, the employees are generally paid for the time on furlough when the budget crisis is over.
These are the advantages and disadvantages of employee furloughs.