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While the threat the current pandemic puts on public health is frightening, the economic impact of fighting the virus may be just as challenging. Record numbers of people are unemployed and scrambling to find work, ensure they have enough necessities on hand to make it through the lockdown, or both. An additional challenge of being a worker navigating through the COVID-19 economic environment is the different ways governments and employers can cut their workforce and how to define furlough or some other form of ending your employment.
Two of the most common situations people are suddenly finding themselves in are situations of being laid off or furloughed. Both employment categories have significant differences and different levels of eligibility for economic assistance. Check out how to define furlough vs layoff, so you understand all the options you have if you’re suddenly out of work.
When a worker is laid off, that means he or she is no longer employed at a given company and won’t continue to receive pay or be able to use company benefits, such as health insurance. General Electric recently announced layoffs of nearly 10% of its U.S workforce due to the expected impacts on the economy. Sometimes, layoffs are temporary, and companies hire their former employees back when conditions change. However, this isn’t always the case.
Depending upon the number of employees at the company, your employer may be required by laws, such as the Worker Adjustment and Retraining Notification Act (WARN), to give you at least 30 days’ notice before laying you off. Some employers may have some sort of severance policy to pay laid-off workers as well, although this isn’t always the case. However, for most small companies with fewer than 100 employees, few laws or regulations offer significant protection for workers who suddenly find themselves out of a job.
If a worker is furloughed, that means that he or she is still considered a company employee, but will work at sharply reduced hours, if at all, and will have pay sharply reduced or suspended. Honda Motor Company recently furloughed thousands of U.S. workers at its factories in response to the current crisis’s economic fallout.
Furloughs allow companies to curtail costs during cyclical slumps or a sharp economic downturn while retaining an experienced workforce on hand to restart operations when the conditions improve. A furlough is considered temporary; once the crisis is over, companies typically bring furloughed workers back to their original employment status. However, in some cases where conditions don’t improve, furloughs can turn into layoffs.
While furloughs are getting a great deal of attention during this crisis, they’re fairly common. The automotive and agriculture industries often use furloughs to keep costs under control when keeping skilled workers on payroll doesn’t make good business sense. Unlike layoffs, furloughed workers often retain company benefits such as health insurance, one of the key incentives to stay affiliated with a company until the economic situation improves. However, this isn’t always the case, and ultimately, company management teams set the terms for the furlough.
During normal times, both laid-off and furloughed workers can often qualify for unemployment benefits; every state’s rules about qualification for unemployment are different, however, so you should always check with your state’s employment agency to determine if you’re eligible. The recently passed Coronavirus Aid, Relief, and Economic Security Act (CARES) also provides unemployment aid for people out of work regardless of whether they’ve been laid off or furloughed.
Furloughed workers can and often do seek out part-time employment to make up for their loss in pay. Depending upon your situation and the type of employment you take up during the furlough, you may even remain eligible to collect some sort of unemployment benefits. Again, check with your state to determine your eligibility for the various types of unemployment aid available if you find yourself in this situation.
Additional relief may be coming soon for laid-off and furloughed workers, too. Make sure to stay up to date on any new stimulus acts so you can make sure you’re taking advantage of the full benefits available to you.
Whether you’re furloughed or laid off, understanding your current situation and the potential benefits available is critical to effectively navigating the current crisis. If you’re suddenly out of work, you should continue to check the websites for federal agencies such as the Department of Labor and Small Business Administration to determine any new benefits or changes to old ones. If you’re looking for somewhere with more tips on how to handle your finances during this crisis, make sure to visit our resource center where you can find more information about our program and how to make your finances work during extended periods of unemployment. Additional unemployment benefits and relief may be forthcoming at the federal and state level too, so stay tuned and be ready to take action to improve your economic situation during this unprecedented crisis.