Whether it’s a temporary solution or a permanent change, reducing the size of your workforce is a difficult decision and can impact employee morale. When you downsize there are two ways to do it. You can either furlough employees or lay off employees. Furloughs are generally a reduction in employee hours while layoffs are essentially terminations. There are some vital differences that your human resources team should be aware of between furloughs and layoff that can help or hurt your business. Here are some of the differences between furloughs and layoffs: 


Furloughs are a temporary reduction in hours or forced unpaid leave. Employees that are furloughed are promised to return to their job with their original hours. Because of this, employees continue to get benefits offered by your company. One of the great benefits of furloughing employees is that you don’t have to go through the hiring process after temporary reductions have finished. It is important to understand the impact that a reduction in hours can have on an employee’s benefits eligibility. Check you plan documents, or if you are a client of Helpside, reach out for assistance.  

Though furloughs make some things simpler, there are also a lot of requirements associated with furloughs. Employers have to think about who will be furloughed, how long they will be furloughed, how many hours will be reduced, how to notify employees, and how to bring back employees once the furlough is over. There are also state and federal laws about furloughs that employers need to understand.  


A layoff is nothing more than a mass termination due to lack of funds or work, making it a lot simpler than a furlough. Sometimes employees prefer layoffs because of the clean break they offer. Doing what suits your employees best can boost your business reputation, even if it requires a layoff.  

Even though layoffs save a lot of money immediately, they can cost more in the long run due to hiring, onboarding, and termination costs. There is also the issue of losing your employees for good. Some of the employees you layoff may be good friends or top talent. Either way, losing those employees can hurt your business’s morale and productivity.  

Though downsizing is never fun, understanding the differences between furloughs and layoffs can be helpful. If have questions about legal requirements for furloughs or layoffs contact Helpside at humanresources@helpside.com