Furlough vs Layoff: Difference's, Pros & Cons

The words furlough and layoffs often get mixed up, but they both are different things. Different people might use them differently. But it’s more important to understand the situation than just the word used. Many businesses are struggling financially because of the COVID-19 pandemic. Before moving further it’s important to understand the difference between furlough vs layoff.

Layoff vs Furlough

When companies need to save money, they might use furloughs or layoffs. Even though Furlough vs layoffs might seem similar, they have different requirements and results.

What is Layoff?

Most people know about layoffs it might be permanent or temporary. Layoff happens when there’s not enough work or money. It usually happens because there’s not enough work. It’s different from firing someone for not doing well or other reasons.

What is Furlough?

Furloughs mean employees take a break but keep their benefits. It’s like a break from work because the company or worker needs it. During a furlough, the employee might work fewer hours or take unpaid time off. When someone’s furloughed, they’re technically still employed. For example, a company might ask employees to take some days off without pay each week for a few months. It’s a way to cut costs without ending the job permanently.

Exploring the difference: Furlough vs Layoff

Comparison Basis Furlough Layoff
Employment Status
Employees remain employed but take a temporary break.
Employees are temporarily or permanently separated from their jobs.
It may be unpaid or have reduced pay/hours.
Generally unpaid after termination.
Job assurance
Expected to return to work after the break.
No guarantee of rehiring or return.
Due to company or employee needs, economic conditions, or temporary business downturns.
Due to lack of work, financial constraints, restructuring, or changes in business operations.
Often retain some benefits like healthcare.
Benefits might end after termination.
Eligibility For
Typically, eligible for benefits.
May be eligible for unemployment.
Paid time off (PTO)
They may even be able to use PTO to receive payment while they’re not working.
Generally, receive payouts for any days remaining in PTO.

Pros of Furloughs

Temporary Solution

Furloughs are temporary unpaid breaks from work that companies use during tough economic times instead of firing employees permanently. It help companies to save money temporarily without severing ties with their employees, allowing both parties to weather the difficulties together and resume work when conditions improve.

Employee Retention

Keeping skilled workers during tough times through furloughs helps companies preserve their valuable knowledge and experience. When things get better, having these experienced employees ready to return speeds up the recovery process and saves time on training new staff.

Cost Savings

Reducing work hours or unpaid leave through furloughs saves companies money because they don’t have to spend on hiring and training new employees after layoffs. It’s a cost-effective way to manage during tough times while retaining experienced staff for when the situation improves.

Cons of Furloughs


Uncertain furlough durations can make employees worried and seek more stable jobs elsewhere, leading to talent loss. The anxiety caused by not knowing when they’ll return to work might lead some employees to look for more secure employment.

Reduced Productivity

Reducing work hours or staff during furloughs can lower overall productivity because there are fewer people to handle tasks. This might lead to delays, lower-quality work, and potentially harm the company’s reputation if customers experience service or delivery issues due to reduced staffing levels.

Pros of Layoffs

Immediate Cost Reduction

Layoffs immediately cut labor costs for a company because they reduce the number of employees getting paid. This quick reduction in the workforce helps the company save to money on salaries and benefits, providing immediate cost savings.

Strategic Restructuring

Layoffs allow companies to reorganize their workforce, making it more efficient and competitive. By implementing efficient operations and focusing on essential skills, layoffs help companies adapt to changing needs, improve productivity, and stay competitive in their industry.

Clarity for Employees

Giving employees clear and final decisions, helps them plan for the future. It allows them to explore new job opportunities or make necessary adjustments without uncertainty, providing a sense of closure and enabling them to move forward with their career plans confidently.

Cons of Furloughs

Talent Loss

Losing experienced staff during layoffs means companies might struggle to find and train replacements, potentially slowing down recovery once the economic situation gets better.

Damage to Morale

Layoffs can lower morale among remaining employees, causing decreased motivation and potentially creating a toxic work environment. The fear of losing their jobs can make employees anxious and unmotivated, impacting their productivity and the overall atmosphere at work.

All Things Considered

When comparing furlough vs. layoff , furloughs offer temporary unpaid leave to retain skilled workers and aid a faster recovery. However, they might cause anxiety and talent loss. Layoffs cut costs immediately and allow strategic restructuring but risk losing talent and lowering morale among remaining employees. Both approaches have their pros and cons, and the choice depends on the company’s goals and circumstances.
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