Furlough, Layoffs, RIFs, Oh My!

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I wanted to create a short informational piece that can help give you data through this time of uncertainty. There are a lot of terms floating around and people are struggling to know the difference. And more importantly, to know which one fits their situation.

Furlough, Layoff, Reduction in Force (RIF), OH MY – all three are different but have to do with reducing a company’s payroll costs. Many of us use these terms interchangeably, but they actually mean something very different.

Furlough

A furlough is considered to be an alternate to a layoff. This is what you want to use if you need to reduce your employee’s hours or give them a specific amount of unpaid time off.

  • Two examples:
    • XYZ Company is lowering their nonexempt workers from 40 hours a week to 32 hours a week for the remainder of the year.
    • ABC Company is requiring all employees to take two weeks of unpaid leave sometime before December 31, 2020.

Be careful with salaried employees. To stay in compliance, a salaried employee must still meet the Department of Labor’s minimum salary requirement. And keep in mind with salaried employees, if they answer ONE email, phone call, or do ONE thing for your company during the week, they need to be paid that FULL week salary.

You can reduce their salary as long as you make it a uniformed reduction (all salaried employees by 5% for example). You can also convert salaried employees to hourly as long as ALL salaried employees are converted and they are given notice before the change occurs. Finally, once they are converted to hourly, make sure they earn at least minimum wage and are paid for overtime.

Layoff

A layoff is a “temporary separation from payroll.” HUH? Translation: The employee is no longer working because there is not enough work to perform. What makes it a layoff is the employer believes this condition is temporary, and intends to recall said employee when things change.

  • Example:
    • XYZ Company instituted a layoff of all of their employees during the holiday months but then rehired them in February.

With a layoff, the employees are typically able to collect unemployment benefits.  Employers have the option to allow the employees to maintain benefit coverage (for a specific amount of time) knowing they will be coming back when the situation passes.

Reduction in Force (RIF)

A RIF happens when a position is eliminated without the intention of replacing it. It is a permanent cut in headcount for an organization.  A layoff can turn into a RIF should the employer choose to reduce their workforce permanently.

  • Example:
    • XYZ Company has restructured and no longer needs an inhouse controller. The controller’s position has been “riffed.”

The term layoff is often used as a synonym for RIF – however the RIF is permanent vs. the layoff which may not be.

Whatever term you use, whatever decision you make during this Coronavirus crisis, we are here for you. We can talk out your options and help you navigate the tough decisions.  Together, we can weather the storm.

Reference:  www.shrm.org