Employers can keep experienced personnel while cutting costs
Once, the term furlough conjured an image of a sailor on the town or a model prisoner rewarded with a visit home.
These days, a furlough has taken on a new meaning as an unwelcome, unpaid vacation.
This year, 11 percent of 245 large companies have furloughed workers and another 10 percent have asked for volunteers, according to a survey by Watson Wyatt, a management consultant. Another 6 percent plan to roll out furloughs over the next 12 months.
“In some ways, it’s a good sign,” said Philip Kirschner, president of the New Jersey Business & Industry Association. “Employers are retaining the people who know the business, so they will be there when the economy comes back.”
Furlough has its roots in the Dutch word verlof, describing a leave from military service.
Today’s interpretation sprang from the need for businesses and governments to cut costs quickly, while preserving personnel.
Manufacturers have long used furloughs, sending home workers when orders were slow or plants needed to be updated.
“They were written into contracts as to when workers could expect them and how long it would be before they were called back,” said Janice Fine, an assistant professor of labor studies at Rutgers University.
This year, with the country in a stubborn recession, white-collar workers are getting a taste.
“As they see their colleagues get laid off, more employees are willing to take furloughs without complaint,” said Michael Homans, a Cherry Hill, N.J., labor and employment lawyer. “They understand that their employers need to cut costs.”
Gannett Co. Inc. – which publishes 85 daily newspapers, including the Tucson Citizen, more than 850 magazines and other nondailies and has 23 television stations in the U.S. – sliced $20 million from the payroll with one-week furloughs in the first quarter for all employees. Gannett announced a second one-week furlough for the second quarter.
Arizona has included furloughs as a way to help cut costs. The city of Tucson and the University of Arizona also are mandating unpaid leave for employees as a cost-cutting measure.
With the jobless rates skyrocketing across the nation, workers who are missing paychecks might take consolation in keeping their jobs. But that won’t help to pay the bills, said Shawn Ludwig, a staff representative for the Communication Workers of America.
“Everybody understands the economy is tough and we’re in this together,” he said. “But this is about putting bread on the table. It’s about paying for day care.”
Kirschner said keeping people working is good business.
“If it’s at all possible to hold onto the people with experience and expertise, employers should do it,” he said. Furloughs benefit employees who might otherwise be laid off. But they help businesses, too, enabling employers to conserve cash in the short term, without the costs of severance.
“Profits increase when you generate revenue at less cost,” Homans said.
Drawbacks include overtime expenses when employees on the job aren’t able to handle the workload. A company also might not be able to deliver a product in a timely manner.
In theory, furloughs help companies keep the brightest and the best in the fold.
But Homans said there’s always a risk the go-getters will use their time off to go get another job.
“Granted, there aren’t as many places to go,” he said. “But there are still employees who will jump for better pay.”
As furloughs become more common, employees are voicing concerns about workers at the bottom of the pay scale who are hit harder by a missed payday.
Companies that are straightforward in addressing the hardships associated with furloughs will fare better in the long haul, he said.
“Management can forge lasting relationships with employees based on the way they handle these hard times,” he said.