The COVID-19 pandemic resulted in increased unemployment rates across the United States. At the start of 2021, 18.4 billion people were receiving some form of government unemployment benefit, and an additional 965,000 workers filed for unemployment during just the first week of January 2021. Until now, some states have been able to pay an additional $300 in unemployment benefits to eligible workers with government funding, but this funding is set to run out in March 2021. This rise in unemployment doesn’t only affect those who are unemployed, but also their previous employers and business owners. As the employer, deciding whether to lay off or furlough an employee is not taken lightly. When this difficult decision has to be made, there are still ways employers can support these employees while they’re unemployed.
Furlough vs. Layoff
First, it’s important to know the difference between furloughing an employee and laying off an employee. A furlough is a mandatory, but temporary, leave of absence. The employee is expected to return to work or have work hours restored from a reduced work schedule. Furloughs are often used when the employer does not have enough cash for payroll (e.g., a global pandemic halting business operations) or when there is not enough work for all employees during a slow period. Furloughing allows employers to prevent laying off their employees, especially if there is uncertainty over how long work will be scarce, or how long the business will be non-operational. Depending on the circumstance and the state the employee works, employees who are furloughed may still be able to file and collect unemployment benefits to cover their reduced work.
A layoff is a complete separation from employment due to a lack of work. Layoffs are typically not the result of anything the employee has done—e.g., separating employment with an employee due to performance issues or poor conduct. Layoffs can be temporary, and some employers will continue to pay benefits to their employees with the hope that eventually work can resume. However, the employee is not expected to return to the same position should work become available. During the past year, it was common for temporary layoffs to become permanent as businesses struggled or failed to re-open. It was also not uncommon for furloughs to become layoffs as well. Employees who are laid off are eligible to receive unemployment insurance as well.
How Employers Can Support Employees After Furloughs or Layoffs
Deciding which option is right for your business during a time of crisis is incredibly stressful. Not only will this have a direct impact on operations and revenue, but it will also directly impact the livelihood of your employees during a tense and uncertain time. There are some ways employers can continue to support their employees if they need to make the decision to furlough or layoff.
Offer Severance Pay
Even though finances are tight for businesses, if employers can afford to offer some type of severance package to their employees, this would help employees financially survive the period between their final pay and their unemployment benefits. Severance pay is generally based on the amount of time the employee has worked for the company and should be outlined in the employment contract or employee handbook. Some severance packages can even include benefits and paid time off pay-outs.
Extend Health Benefits
Some employers may not be able to provide severance packages for the employees, given the circumstances. However, some employers are extending their healthcare benefits to the employees they have to furlough or layoff. Covering COBRA costs, for example, is one way to support your employees through the period between their final paycheck and when unemployment insurance begins.
Rehire the Same Employees When You Can
If your business is able to resume, approaching former employees as soon as possible benefits both the employee and your business. Your former employee can return to work and restore full benefits, while saving the company time on having to retrain all new staff.3 When rehiring, it’s important to give employees as much notice as possible. For furloughed employees, it’s considered best practice to send what is called a “recall letter.” Recall letters provide the employee at least one week’s notice and a date when the employee must notify the employer if they will be returning. The letter should also outline any changes to the operations, including COVID-19 safety practices.
Assist Employees with Filing for Unemployment
Another great way to support employees is offering to assist them with filing for unemployment benefits. To do so, employers can provide their employees with the website and physical address to the local unemployment office to streamline the unemployment benefits process. They will also need the address and Federal Employment Identification Number (FEIN) of the business as most state require this when filing as well. It’s also helpful to provide the contact information for the human resources department or representative to address any questions regarding unemployment filing, or general questions.
Deciding to layoff or furlough employees is a difficult decision no employer wants to make. Determining what is best for your company during this unprecedented time is where Harbor America can step in and assist. Our team of human resource management professionals will walk you through the best course of action, how to handle the furlough and layoff process, and support you in the rehire process when it’s time. Through our PEO services, our team is available to assist with unemployment claims and support employees when they have questions. Harbor America’s HR experts will work with you every step of the way to ensure the best plan is in place to support your business and employees during this difficult time.