What's the Difference Between Being Furloughed and Laid Off?

With the coronavirus outbreak affecting businesses everywhere, employees are finding their jobs in jeopardy

Photo: Brazil Photo Press/SplashNews.com

The coronavirus outbreak has had a massive impact on the American economy in recent weeks.

Non-essential services such as movie theaters, gyms and restaurants have seen their businesses come to a standstill once “stay-at-home” orders were issued in most states across the country in mid-March in an effort to slow the spread of coronavirus. Since then, millions have lost their jobs as businesses around the country emptied out.

According to the most recent numbers listed by the U.S. Department of Labor, nearly 17 million Americans have filed for unemployment since the middle of March. A staggering 6.6 million Americans filed for unemployment in the week ending April 4 alone. Terrifyingly enough, these numbers will likely be higher when the department releases its updated statistics on Thursday.

Before the spread of coronavirus, the U.S. had experienced some of the lowest rates of unemployment it has seen in decades, with a low of 3.5 percent just in February.

Today, close to 10 percent of the United States workforce is without a job, and the Economic Policy Institutes estimates 20 million people could be affected by more job losses, layoffs or furloughs by July.

But what’s the difference between being laid off, or being furloughed?

Medical workers prepare to help coronavirus patient in busy hospital. Win McNamee/Getty

For one, a layoff can be either a permanent or temporary suspension of employment, according to the Mighty Recruiter. Being “laid off” is a term mostly used when someone is terminated because the company can’t afford to pay them or business is down, Dictionary.com adds, not necessarily because the employee was not good at their job.

Conversely, being “fired” usually means an employee was terminated because of their personal performance.

On the other hand, an employee furlough is considered a temporary — but unpaid — leave of absence from work, with the assumption the employee will be brought back at some point. This is to help the company save money during times of “economic difficulty,” Adam Calli, founder and principal consultant at Arc Human Capital, told Business Insider.

“The employer does this to drastically cut costs in times of economic difficulty, [whether for] the economy overall, or specific to a particular industry, company or location,” he explained.

“For many organizations, labor costs (payroll tax and employee benefits) can be 70 percent of their operating cost!” he added. “That’s why this is where they look first to save money the fastest.”

Sometimes, companies will allow furloughed workers to still have access to health care coverage or paid time off.

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Furloughing is actually a common practice used by many companies, such as landscaping and construction businesses, that will typically furlough workers during cold seasons, Business Insider adds.

But during a national crisis such as coronavirus, companies that do not regularly furlough workers will turn to the practice to stay afloat. Recently, Macy’s announced it was furloughing 125,000 employees as a result of the pandemic.

According to the New York Times, the U.S. has seen 606,800 cases and 25,922 attributed to coronavirus as of Wednesday afternoon.

As information about the coronavirus pandemic rapidly changes, PEOPLE is committed to providing the most recent data in our coverage. Some of the information in this story may have changed after publication. For the latest on COVID-19, readers are encouraged to use online resources from CDC, WHO, and local public health departments. To help provide doctors and nurses on the front lines with life-saving medical resources, donate to Direct Relief here.