Furlough vs Layoff

Furlough vs Layoff: Explaining the Difference

03/06/2021Covid -19 , Payroll & PAYE

Coronavirus pandemic has adversely affected the business industry by reducing the resources of the business owners. Consequently, business owners are contemplating for employees’ furlough or lay off. Let’s kick off with the difference between Furlough vs Layoff.


Furlough vs Layoff- Differences


Due to a great downfall of the world’s economy whilst the Covid-19 pandemic, we have seen an awful decline in business activities. As a result, many businesses are shut off, and those who’re operating are with the least number of employees. In such a situation, as a business owner, you might wonder to furlough or lay off your staff.

A furlough is a forced, unpaid leave, hour reduction that is done by the business temporarily. The employer does furlough to reduce the cost of their payroll when a business faced financial trouble or an economic downturn. A furlough can be a layoff, but in layoff employees are not retained.

On the contrary, Layoff is the permanent or temporary termination of the employees. Though there is a possibility for the rehiring but generally a layoff is considered a permanent separation. We can call furlough as a pause, whereas layoff is the permanent termination.

Furlough vs Layoff

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Wondering which might be the best for you during the ongoing pandemic?

Let’s dive deeper into the difference between Furlough vs Layoff to know which one is the best. The major difference includes:


1) Time limit


A furlough is a temporary absence or leaves of employees that the employer provides for a short time. On the other hand, in layoff, the employer can terminate the employees on a temporary or permanent basis.

The time limit of furlough is addressed by the employer but a layoff can be for an indefinite period. In furlough, the employer might not cut pay for a continuous period, rather it can be a temporary pause of hours in a day or a week in a month.

An employer who wants a permanent dismissal of his employees would go for layoff rather than furlough.


2) Employee’s Benefits


If a business is furloughed, an employer might pay the paid time off benefits to its employees.  Here, the employees might also receive health insurance, etc. Contrarily, benefits like health insurance and time-off benefits might not be given to the layoff employees. However, it may vary based on the state payout laws.


3) Employer’s Duties


In furlough, the employer stays in touch with the employees and let them know if he wants to extend the furlough’s period. On contrary, if an employer goes for a layoff his responsibilities increase as he’d need to pay the termination payments that are generally given at the time of employees’ termination.


4) Return to Work


In furlough, the employees return to work after the furlough ends. Contrarily, layoff employees are replaced and rehired by the employer. In furlough, employees might search for other jobs but most of them don’t as they are aware that it’s a temporarily leave. Opposingly, in a layoff, the employees search for new jobs and get hired there.

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What should I do during the Coronavirus Pandemic?


You should do the relevant changes to your staff based on your business conditions. During the Covid outbreak, it is reported that almost 50% of small business have gone for layoff.

We recommend you furlough your business if your business is viable enough to face the hard days during the pandemic. So that you’d revive your business activities after the hard times.

Furloughing helps you to:

  • Avoid layoff
  • Reduce your business cost
  • Avoid termination pay
  • Immediate restart your business

If your business is permanently closed due to the pandemic. Laying off would be the better option to save your finances. In future, if there is a need you can rehire them for your business.


Quick Sum Up


As a small business or medium-sized business owner, you need to figure out the impacts and implications of the coronavirus pandemic on your business. While choosing between furlough vs layoff, consider the impacts each will be leaving on your business.

If you are unable to select between the one, contact our business accountants for in-depth advice!

Don’t hesitate to get in touch with us, we’ll get back to you in the fastest possible time.


Disclaimer: This blog is intended for general information about furlough vs layoff.

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