Organizational Wellness

Everything HR Leaders Need to Know About Furlough Benefits

Last Updated Jan 29, 2025
Time to read: 11 minutes
Discover the most important furlough benefits that you can provide to furloughed workers to boost their sense of purpose and engagement.

As an HR leader, you’re the champion and cheerleader for many of your employees’ best and brightest moments. When 66% of employees believe that their HR department genuinely cares about their wellbeing, you want to live up to those standards! That’s why it can feel like such a swift kick in the gut anytime you have to carry out a furlough or any other reduction in force. You come to work to celebrate and uplift the amazing people you work with. Downsizing, even temporarily, doesn’t bring anyone joy.

 

But your furlough benefits package can provide some peace of mind, for company leadership and employees alike. Comprehensive benefits help ease the transition and give your employees the resources they need to keep up their wellbeing. That’s especially important while they’re going through times of uncertainty. Discover the ins and outs of the furlough process — and what HR can do to make it as painless as possible.

What is a Furlough?

A furlough is a temporary leave of absence from work, often initiated by the employer. It typically occurs for economic reasons or due to a reduction in operational needs, and it is distinct from termination. Employers must clearly communicate the terms of a furlough, including its expected duration and the rights of the employee during this time, to avoid legal or operational misunderstandings. During a furlough:

  • Employment Relationship: The employee retains their job, but they do not perform work or receive pay during the furlough period.
  • Duration: It is usually for a defined, often temporary, period.
  • Benefits: In many cases, employees may retain certain benefits like health insurance during the furlough, depending on employer policies and local regulations.
  • Reasons: Common reasons for furloughs include financial strain on the employer, seasonal closures, or external events impacting business operations (e.g., a pandemic or government shutdown).

When furloughs are instituted, they can be stressful and disturbing for employees. They may feel uncertain about the future of their jobs and worry about how they’ll pay their bills or support themselves as they go through this transition period. But furlough benefits can help to ease some of these anxieties.

Furlough vs. Layoff: Understanding the Difference

Furloughs and layoffs are both downsizing measures, but it’s important to understand the differences between these two strategies for reducing staff. A furlough might seem similar to a layoff because it’s not a paid leave, but there are some key differences between the two.

furlough is temporary, typically lasting a few weeks or months. Once the furlough period ends, employees are welcomed back to the same company with open arms since the cost-cutting measures were temporary. In some cases, employees may experience a partial furlough, such as reduced work hours or fewer scheduled days each week.

layoff, on the other hand, is permanent. Employees who go through layoffs usually leave their companies for good — and unlike furloughs, they are always all or nothing. They have to look for work elsewhere at a completely new company.

Aspect

Furlough

Layoff

Definition

Temporary leave of absence

Complete termination of employment

Duration

Short-term (weeks or months)

Permanent

Payment Status

No pay during leave (or reduced if partial furlough)

No pay

Employee Relationship

Maintained, expected to return

Terminated, not expected to return

Benefits

Often retain benefits like health insurance

Benefits usually end immediately or after a short-term wind down period following termination

Typical Scenario

Temporary cost-cutting measure

Permanent workforce reduction

Impact on Employee

Reassurance of return, less impact morale

Creates uncertainty and can damage morale among remaining workforce

Layoffs can create long-term uncertainty and damage employee morale. By contrast, furloughs often provide employees with reassurance — a temporary pause instead of a permanent goodbye. For this reason, furlough benefits often play an essential role in helping employees feel supported and valued during their time away from work.

Advantages and Disadvantages of Furloughing Employees

Furloughing employees can impact the organization and employee wellbeing, both positively and negatively. While furloughs offer short-term relief for employers, the repercussions on employees often extend to your business, too.

Advantages

Employers may choose to furlough employees for these benefits:

  • Cost Management: Furloughs enable businesses to reduce labor costs during economic downturns or unforeseen crises without resorting to permanent layoffs.
  • Retention of Talent: Sometimes, furloughs help companies retain skilled employees instead of totally losing them. This means employers can avoid the costly process of recruiting and training new staff when business picks up again.
  • Employee Morale: Knowing that they have a chance to return to work can boost morale among furloughed employees, especially compared to permanent layoffs.

Disadvantages

Furloughing can also create some frustration for employers and employees, such as these concerns:

  • Financial Strain: Employees typically face financial challenges due to a temporary loss of income. This can cause stress and hurt their wellbeing.
  • Decreased Productivity: Having employees inactive can lead to reduced productivity since key staff members are absent, which can impact the organization’s efficiency.
  • Uncertainty: Furloughed employees may feel insecure about their future with the company, which can affect job satisfaction and employee loyalty.
  • Skill Erosion: Prolonged furloughs can lead to a decline in skills and knowledge among employees, potentially damaging their performance and confidence.

While furloughs come with both upsides and challenges, the way they’re communicated can make all the difference. Transparent communication paired with thoughtful benefits can ease the transition for employees and help your organization maintain trust and morale.

Why Would An Employer Furlough Instead of Layoff?

When businesses face financial uncertainty, furloughs can often be a better alternative to layoffs. It often makes sense to furlough employees if the circumstances and demand for labor are expected to improve soon. Because companies don’t have to hire new employees down the road, organizations save money and the loyalty of the employees. Recruiting, hiring, and training can be quite expensive, and you don’t want to lose your top talent if possible — so furloughing can be both cost-effective and good for talent retention.

In some cases, government support programs or incentives may be available to employers who choose furloughs. This can provide financial assistance and encourage the preservation of jobs — which is good for the economy, too.

The decision to furlough is usually made with careful consideration. Employers weigh the immediate cost savings against the long-term impact on both the workforce and the organization. When employers do decide to furlough instead of layoff, it’s important to communicate with employees. This can look like emphasizing the temporary nature of the situation and the company’s intention to bring them back when conditions permit.

Furlough Laws and Regulations HR Should Know

Navigating the legal aspects of furloughs is one of the most important responsibilities for HR leaders. By understanding key regulations, you can ensure compliance, minimize risks, and maintain employee trust.

The WARN Act

The Worker Adjustment and Retraining Notification (WARN) Act requires businesses with 100 or more employees to provide 60 days’ notice for furloughs or layoffs that affect 50 or more workers. This ensures employees have time to prepare for the transition. Non-compliance can result in fines or penalties, so it’s really important to review whether your company meets the criteria for WARN Act requirements.

Avoiding Discrimination

The selection process for furloughs must be based on objective criteria to avoid discriminatory practices. Factors like seniority, job role, or department impact should be carefully documented. Consistent communication about the decision-making process can help prevent misunderstandings and reduce the risk of legal challenges.

Wage and Hour Compliance

Even during furloughs, employers must adhere to wage and hour laws. For example:

  • Non-exempt employees should not perform any work during furlough periods unless properly compensated.
  • For exempt employees, ensuring they remain fully inactive during a workweek is essential to avoid violations of salary requirements.

Record Keeping

Maintain thorough records of furloughed employees, including written agreements or notices detailing the terms of the furlough. Again, clear documentation is key — it protects both employers and employees and helps you stay in compliance with labor laws.

By being informed and proactive about these regulations, HR leaders can create a smoother furlough process that minimizes risks and demonstrates a commitment to fairness and transparency.

Furlough Benefits That Employees Are Entitled To Receive

For human resources teams, it’s important to ensure that furloughed employees receive all of the furlough benefits they’re legally required to provide. These might include:

  • Unemployment benefits: Some states allow furloughed workers to file for unemployment insurance while they’re on leave. This can help support furloughed workers financially during this difficult transition period.
  • Paid time off (PTO): Employees who are furloughed can still keep their accrued PTO, although you’re not required to actually pay out this time while they’re on leave. You’re not required to pay any sick leave, either.
  • Retirement benefits: Depending on the employee’s status and your specific retirement plan, they may be entitled to receive contributions for the period of time when they’re on furlough.

Additional Benefits You Can Offer Furloughed Workers

In addition to the employee benefits described above, you can also consider offering furloughed employees other forms of support. Examples might include:

  • Career coaching and training: Furloughed workers may feel like they’re at a standstill in their careers, wondering if now is the time to add onto their skills or focus on career growth opportunities. Offering furloughed employees career coaching and training can help them gain the skills they need to become even more valuable employees once they return, as well as pursue their personal career goals.
  • Access to healthcare coverage: Many companies provide furloughed employees with access to the same health insurance they had while they were on the job. This can help furloughed workers stay healthy and manage any medical conditions they may have without worrying about their insurance coverage. If your health plan doesn’t allow them to stay enrolled while they’re on leave, they can elect to remain covered under the Consolidated Omnibus Budget Reconciliation Act (COBRA).
  • Extra fringe benefitsYou can continue to offer smaller benefits within your total rewards package that bring added value to workers on value. Discounts on products and services offered by your company might be appreciated. Continuing to cover fitness classes or memberships, telehealth, and mental health expenses, or meal-prepping services can help support your employees while they’re on leave.

Furlough Best Practices for HR Leaders

Handling a furlough is no small task, but with the right approach, you can manage it effectively while keeping your team’s trust and morale intact. These best practices will help you rise to the challenge and support your employees through uncertainty:

  • Spell it out clearly: A strong furlough policy acts as your blueprint. It should cover who’s eligible, what benefits employees will keep, and how long the furlough will last. Keep it straightforward and share it early to avoid confusion.
  • Lead with transparency: Be open about why the furlough is happening and what employees can expect. Clear, empathetic communication shows you’re in their corner, even during tough times. Use emails, town halls, or one-on-one meetings to keep everyone informed.
  • Stay in the loop: Don’t let furloughed employees feel forgotten. Check-in regularly, share updates about their status, and remind them they’re an important part of the team.
  • Keep up with the law: Rules around furloughs can change in the blink of an eye. Stay on top of employment laws and government programs to avoid legal hiccups and to keep your employees informed.
  • Make wellbeing a priority: Don’t let furloughed employees feel like they’re on their own. Offer benefits like mental health resources, online fitness classes, or skill-building opportunities. A little support goes a long way.

Furloughs aren’t easy, but with these steps, you can show your team that they’re more than just employees — they’re part of a community that cares.

Supporting Employees Through Tough Times

Furloughs aren’t just business decisions — they’re human ones. When your employees are facing uncertainty, how you support them can make or break their experience with your organization.

Wellbeing is the Foundation

Stability goes out the window during a furlough, which can hit your employees hard.  Nearly half of workers say work stress is degrading their mental wellbeing, while 53% report losing sleep over stress and anxiety. This is where wellness programs come in. Think telehealth sessions, virtual fitness memberships, or even financial planning tools. These resources help employees stay balanced, motivated, and ready for the future.

A Chain Reaction of Positivity

When furloughed employees feel supported, it creates a ripple effect across the entire workforce. Your active employees see that you care, which boosts trust and morale. And when the furloughed team returns, they’re ready to hit the ground running — loyal, engaged, and grateful.

Keep Communication Flowing

Out of sight doesn’t mean out of mind. A quick check-in or an update about the company’s progress keeps furloughed employees in the loop. It’s a small gesture, but it says, “You’re still part of the team, and we’re looking forward to having you back.”

The truth is, furloughs don’t last forever, but the impact of how you treat your employees during them will. Show up for your team, and they’ll show up for you when it matters most.

Supporting Employee Wellbeing During a Furlough

Furloughs can create financial stress, skill stagnation, and feelings of uncertainty for employees. These challenges impact their wellbeing and can affect the organization’s morale and long-term productivity.

Employee wellbeing programs address these issues by offering resources to support mental, physical, and financial health during furloughs. Providing access to virtual fitness classes, career development tools, or financial planning sessions can reduce anxiety and help employees feel valued. Companies with robust wellbeing programs see significant benefits, with 98% of HR leaders reporting reduced turnover and 91% noting lower healthcare costs​​.

Speak with a Wellhub Wellbeing Specialist to explore how a tailored wellbeing program help your employees stay engaged and supported.

Company healthcare costs drop by up to 35% with Wellhub*

See how we can help you reduce your healthcare spending.

Talk to a Wellbeing Specialist

[*] Based on proprietary research comparing healthcare costs of active Wellhub users to non-users.


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Wellhub Editorial Team

The Wellhub Editorial Team empowers HR leaders to support worker wellbeing. Our original research, trend analyses, and helpful how-tos provide the tools they need to improve workforce wellness in today's fast-shifting professional landscape.


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