Implications of Workforce Reduction

Implications of Workforce Reduction

With record-low unemployment less than a month ago to record high jobless claims amid the COVID-19 outbreak, businesses are making tough decisions at lightning speed. As these moves are cost-cutting measures, the terminology used can make a big difference down the road for both the employees and the employer.


A furlough is considered temporary and typically more flexible than other forms of labor reduction. According to SHRM, employers have the choice of reduced hours during a workweek or requiring a pre-determined amount of time as unpaid time off. Employees typically retain benefits such as health and life insurance during this time and have the expectation of returning to work at full capacity as soon as the furlough ends.

Employees who are furloughed can request unemployment benefits while they are not receiving pay; however, this is contingent on the state’s guidelines for waiting periods and payment policies. Also, if the furloughed employee receive back pay once the furlough ends, they would be required to pay back any unemployment benefits received.

Furloughed employees may be able to seek alternative work while furloughed if within the guidelines of outside employment for the company.


Lay-offs can also be temporary but are often more long-term or even permanent. Employees who are laid off may receive continued pay and benefits (severance) for a specified period of time. Employees can collect unemployment benefits once the severance period, if any, has ended.


Terminations are permanent separations from the company. These can be initiated by the employer or the employee. With terminations, it is not expected that the employee will return; however if the employee wishes to return at a later date, that employee would have to go through the regular application process. The employee may or may not be eligible for unemployment benefits, depending on the circumstances of the termination.

In light of the Coronavirus Aid, Relief and Economic Security (CARES) passed on March 27, 2020, small businesses have an incentive to keep employees on the payroll. The Paycheck Protection Program is a lending program offered through financial institutions to encourage small business owners to retain their employees through this crisis. Businesses must apply and qualify to obtain assistance from a participating financial institution.


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