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Furloughs 101

Marc Tracy bizbox.slate.com

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June 8, 2009

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Knowing that you probably don't want to lay off your valuable employees, for both business and non-business reasons, but also realizing that you need to cut costs and that your greatest costs probably come out of payroll, we've tried to present ways for you to lower payroll costs while retaining employees. Last time, for example, we examined cutting work-weeks, which enables you to retain talent (and giving them some manner of flexibility) while cutting down on costs. We also looked at top law firm Skadden, Arps, Slate, Meagher & Flom LLP's strategy of telling workers to take a year off.

Today, via the New York Times, we examine the furlough. Unlike cutting workweeks, this does involve telling employees to stop working, if only for a while. And unlike Skadden's method--in which associates got paid about $80,000 a year to do absolutely nothing--you don't get paid when you're on furlough. Basically, they are forced, unpaid leaves-of-absence. But that's still extremely different from layoffs!

The article provides a good rundown of different versions of the furlough, as well as of upsides and downsides. Here's one downside: since you're still paying for the furloughed employee's extremely expensive benefits, to say nothing of flat costs such as office stuff and the like, they're not really that cheap. And here's one good idea: a furlough bank, that lets employees trade with each other (so that those who want more time off, perhaps for a sabbatical, can "take" the time off of those who don't want to take any time off).

And, finally, an upside: as one person who writes frequently on the work-life balance puts it in the article, "Workers may become more efficient because they know they have to get work done in less time. And because these workers are going to be less stressed when they’ve had some time off, I think they’re going to be happier and more productive and creative. We may find that a temporary solution becomes a permanent solution.”

Now is the time to be flexible, and to experiment with cutting costs. The furlough seems like as good a starting point as any.

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