Mandatory Furlough Vs. Layoffs: Strategies for Preserving Your Company's Resiliency

The threat of layoffs not only is stressful for the employees, but it is also very stressful for the company's owner. When layoffs take place the potential for the company to collapse is high. However, if layoffs can be avoided in a market where they are commonplace, then the business owner cannot only create the perception that they are stronger than they may actually be as well as hold on to the personnel assets that they have already invested thousands to millions of dollars in. One alternative to layoffs that businesses have is the mandatory furlough.

Mandatory Furlough

A mandatory furlough is basically a statutory period of time where the employee does not work and does not get paid. This is a practical solution for times when you need to cut your costs, but when you also do not want to lose your employees. The benefits of offering a furlough as opposed to a layoff are that:

1. Your employees can keep their benefits in place.
2. Employees still get to keep their jobs.
3. You do not lose your human assets.
4. You protect the public image of your company.

Hourly Employees vs. Salaried Employees

If you decide to use a mandatory furlough to protect your company's resiliency and to cut your costs then you need to develop a well thought out plan of action. Mandatory furloughs are not as simple as just asking your employees not to work on specific days. They require paperwork and special planning to ensure that you are not breaking any labor laws and to ensure that you do not face any legal problems down the line.

If you have employees that get an hourly wage then the mandatory furlough is very simple. All you need to do is alter the schedule so that each employee works less during the month. It is a good idea to first talk with your personnel manager to determine how many hours in each position is essential for the functionality of the company. Then you can spread out the hour cuts evenly. To make the hour cuts easier to deal with, you can hold a meeting where your employees can help decide how their schedule is to be changed.

Mandatory Furloughs for salaried employees is much more difficult to orchestrate. First of all you will need to work with your company attorney to figure out what labor laws you will need to comply with when developing a furlough program. For example, furloughed employees that are salaried are generally required to earn $450 per week for the week that they worked. This means that if you want to cut your salary expenses then you will need to ask your furloughed salaried employees not to work for entire week's as opposed to just cutting a day a week from their schedule. During the furlough weeks, salaried employees will not be able to work at all, this includes answering phone calls or working at home. If they work at all during a week, then labor laws require that they get paid their salaried rate for the entire week.

Put It in Writing

Regardless of whether you are working with salaried or hourly wage employees, you need to write out your mandatory furlough agreement. This agreement will identify how the employee's hours will be impacted, how their benefits will be impacted and what rules of conduct will be required for meeting the conditions of the new employment agreement. You will want to specifically state that employees on furlough will not be allowed to work in any capacity during the furlough period. While this is not a bullet-proof way to prevent legal problems down the road, it will establish a precedence that you intended the furlough to be a non-work time for the employee.

References

http://www.entrepreneur.com/humanresources/managingemployees/article204024.html