Temporary Layoffs

Thursday, February 26th, 2009 John

To alleviate the financial crisis these days, some companies are reaching out to workers whose temporary job loss will qualify them for unemployment. Some places will bring those surviving temp job loss to campus to help register competent employees. Often those who take their time all at once can qualify for the benefits. At a company for example, where 2,400 employees will have one scheduled time off week every four to six weeks, state unemployment staff were also brought in to help. Still, in cases where furloughs amount to only a few days over a period of months, workers typically cannot apply for unemployment benefits because state benefit systems are not simply set up to handle these temporary unemployment or job loss scenarios.

Temporary job loss, once confined to blue-collar workers, are now hitting white-collar culture as employers dig deep to cut expenses. More companies are implementing these short-term job time offs, called furloughs, as a kind alternative to permanent job cuts. But the spread of furloughs to new sectors and a new class of workers has created a host of issues. Places that are now exploring this are not the traditional industries. A lot of human-resource functions are still trying to figure this out. There is not a rule book or set of clear guidelines yet on this. Furloughs have long been a way of life for workers in up-and-down industries such as construction and automobile assembly. For example, auto workers can have weeks long periods of time off due to slowing orders or equipment downturns. Now furloughs are happening in state governments and universities, publishing, technology companies and even the arts and entertainment industry.

Unpaid periods of temporary job loss let companies keep talented workers by reducing hours instead of cutting jobs. The greatest issue for companies implementing is restoration of momentum when business recovers. In a recent survey of 245 large U.S. companies, 6% of respondents plan mandatory furloughs over the next 12 months in reaction to the economy, with more than 10% having already carried out one. Many are taking these actions for the first time. However, furloughs are no guarantee against eventual layoffs or further cuts, especially in extreme budget constraints. A company, for example, required all salaried employees to take a weeklong furlough during its second quarter. The move will save the company between $800,000 and $850,000, according to its Chief Executive, who will take a week off also. At the same time, same company has not ruled out repeat temp lays off or even permament job cuts. In some cases furloughs or temp job losses can feel as if they go too far, particularly when they seem to be punishing the highest-paid workers. A move that protects the lowest on the pay scale could disenfranchise high performers. You have got very talented, committed people who work long hours and here you are asking them to basically give up several days worth of remuneration. To ask a top performer to take a furlough day is not a very comfortable feeling.

Company-wide furlough that does not differentiate between pay levels may be tried, but it raises the question of whether cutting from the lowest earners is fair. It could mean the difference between eating or paying rent for low earners. Another company, for instance, is hoping to save about $3 million by furloughing all of its 800 nonunion workers for two weeks. Most of them are professionals. The company wanted it to be fair
and equitable and across the board. For her part Miss Stane, who will take her first furlough week in the beginning of March, says it is an unsettling situation, but she is relieved she still has a job. Some other workers will go through another downside to employee temp lay off, and that is reduced contributions to their pension fund. Some furloughed white-collar workers say that while losing pay hurts, they are more concerned about their low-wage counterparts.

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