Money Health

What’s the Difference Between Furlough, Layoff, and Termination?

What's the Difference: Furlough, Layoff, Termination
Pin to Pinterest Share on LinkedIn

The coronavirus outbreak has taken a significant toll on the U.S. job market. Businesses of all shapes of sizes have made the decision to furlough, lay off, and terminate employees because they are no longer making the revenue they need to pay them.

According to the Economic Policy Institute, nearly 20 million workers will likely be laid off or furloughed by July. So what’s the difference between furlough, layoff, and termination? Here are some quick definitions:

  • Furlough: A temporary unpaid leave from work.
  • Layoff: Occurs when an employee is terminated, temporarily or permanently, usually during an office or facility closure.
  • Termination: Refers to a permanent (sometimes “for cause”) end to employment.

If you’ve been furloughed, laid off, or terminated as a result of the pandemic, keep reading to learn more about your rights and what benefits may be available to help keep your finances on track during a time of unemployment.

Furlough

A furlough, or mandatory suspension from work without pay, can be as brief or as long as your employer desires. If your employer furloughs you, it’s probably because they didn’t want to lay you off, but don’t have the money to continue to pay you right now. They are hopeful you can return to work and get paid at some time in the near future.

Do not work without pay

As a furloughed employee, you should not do any work for your employer. If you do answer work-related phone calls or emails or engage in any other work-related tasks, your employer must pay you for the time you worked. This holds true if you’re a salaried or hourly employee.

Keep your benefits

If your employer has provided you with benefits in addition to monetary compensation, you can retain them while you’re furloughed. So, if you depend on your employer for health insurance, retirement accounts, life insurance, or other benefits, rest assured you won’t lose them during this time.

Seek new employment

Just because you’ve been furloughed doesn’t mean you can’t look for a new job. In fact, many furloughed employees take temporary jobs during their furlough period so they can bring in some income while they’re away from their main job. Understand that if you want to deliver groceries or perform data entry when you’re furloughed, you have every right to do so.

Collect unemployment benefits

While you may collect unemployment benefits as a furloughed employee, the amount you may qualify for will depend on the state you live in. You’ll also be eligible for the additional $600 per week in federal unemployment benefits that will come from the stimulus plan passed in March. Keep in mind that when you do return to work, your benefits will end.

Layoff

Your employer may have laid you off because there is no longer enough work for you to perform, or they are closing your facility. If things change and work becomes available for you again, they may rehire you. It’s important to note that a layoff is not your fault and has nothing to do with your work ethic or performance. It is simply the result of the current state of your company which may be driven by the economy and its negative affect on your employer.

Seek unemployment benefits

If you’ve been laid off, file an unemployment claim with the state you worked in as soon as possible. If you’ve been laid off due to the coronavirus specifically, you may also be able to collect an extra $600 per week in federal unemployment thanks to the stimulus plan passed in March.

Apply for new health insurance

Unfortunately, you will not be able to keep your benefits as a laid off employee, unless they are part of a severance package. While you can enroll in Consolidated Omnibus Budget Reconciliation Act or COBRA, doing so is quite expensive so you may be better off finding a more affordable alternative through the Affordable Care Act marketplace. If you have an income of less than $17,236 as an individual or $35,535 as a family of four, Medicaid may be an option. You may also be able to secure benefits from your spouse if they’re still employed.

Use your severance package

Your employer may offer you a severance package when they lay you off. It may be a one-time payment or several payments spaced out over a few weeks or months, and may be based on the length of time you have been with the company. Keep in mind that the Fair Labor Standards Act or FLSA does not require employers to provide severance benefits, so businesses may forgo them when times are tough.

Termination

While a layoff means that you may return to work eventually, a termination means you will not be able to do so. If your company believes they won’t need your work for a year or longer, they’re more likely to terminate you rather than lay you off. You may also be terminated or fired for cause. If this happens, you usually won’t be eligible for any benefits from your employer.

Do you have severance?

If you’ve been terminated from your job, your employer may offer severance benefits to you. This is more likely if you’ve experienced termination without cause or have been terminated because your employer no longer needs your services. If you’ve been terminated for cause because you didn’t do your job or did something wrong, you probably won’t receive a severance package.

Consider your benefits

Your employer-sponsored benefits will not come with you once you are terminated. So if you want health insurance, you’ll be responsible for enrolling in COBRA, purchasing a plan from the Affordable Care Act marketplace, or adding yourself to your spouse’s plan.

Get focused on the job hunt

Since your employer will not be calling you back to work, it’s a good idea to start looking for a new job as soon as you can. While this is easier said than done in the middle of a pandemic, it’s possible. Here are a few job search tips that could help you out.

  • Network online: Don’t be afraid to use the power of the internet to find your next position. Join professional groups on Facebook and LinkedIn and make it known that you’re in the market for a job in your industry.
  • Bolster your skills: Now is a great time to boost your skills and make yourself a more attractive candidate in today’s competitive job market. Enroll in free courses and certification programs.
  • Prepare for video interviews: You’ll most likely have to interview via video conferencing until things get back to normal. Prepare for video interviews like you would for in-person interviews. Be ready for your call early and dress professionally.

If your job situation has changed as a result of COVID-19, you’re not alone. While you can’t go back in time and change what happened, you can take steps to improve your situation. We are here to help, with useful information and news from our blog.

Learn More

Anna Baluch is a freelance writer who enjoys writing about all personal finance topics. She’s particularly interested in mortgages, retirement, insurance, and investing.