April 28, 2024
April 28, 2024
During challenging times, some employers are forced to take very difficult but necessary steps to keep their business going. The recent economic crisis has impacted negatively on both individuals and businesses.
While some businesses are faced with terrible financial difficulties, others manage to survive the turbulent times. When a business lacks the funds to pay its staff, the next option will be to either furlough their employees or lay off their staff. This article will explain these two concepts and their differences.
A furlough is a temporary leave of absence from work, usually for a specific period.
When some employers are experiencing financial crisis, and are unable to pay their staff, they can temporarily furlough their employee's employment without pay. For example, during an economic recession, many businesses can put some of their staff on compulsory leave until the company's financial condition improves. The reason behind this is that by refusing to "fire" the employee, the employer wants to continue using the services of the employer, but can not afford to do so temporarily.
During the leave of absence, the employee may not be paid any remuneration or provide any services during the furlough period, but remains a staff of the employer and is still bound by the terms and conditions of the Employment Agreement. For instance, an employee is not required to disclose confidential information or trade secret information of their employer. Also, the employee may not work for a different employer during this period, except if he or she resigns from the employment first.
An organization may furlough their employees in writing by issuing a Furlough Notice to the employee it is intended for. Both parties can also sign the Leave of Absence Agreement to describe the terms of the leave.
Note that the employee may, at any time either before or during the furlough period, resign from their job. This can be done by issuing a Notice of Resignation to the employer. However, the employee must comply with the notice requirement in their Employment Contract.
Lay-off also known as dismissal or termination of employment is a permanent cancellation of an employee's employment. Once a staff's employment has been terminated, the employment relationship between the employer and employee comes to an end. The various forms of lay-off are as follows:
This is when the employer terminates an employee's contract for gross misconduct.
Gross misconduct includes but is not limited to sexual or any form of harassment, discrimination, sexual harassment, theft or fraudulent practices, and other conduct or practices that are considered unacceptable in the workplace.
An example of such is when an employee makes a sexual harassment complaint against a colleague. The employer will usually make its findings to ascertain the veracity of the claim and when the employee is found guilty, the employer may issue a Warning Letter. However, if such conduct persists, the employee may be dismissed.
An employer may end an employment relationship without any reason provided that the employee is given the proper notice or given salary in lieu of notice. For example, if the employer intends to terminate the employment for any reason owing to no fault of the employee, the employer is required to either issue a notice of termination or offer a salary in lieu of notice to the employee.
Furlough is a temporary time off from work, while lay-off or termination brings a permanent end to an employment relationship. An employee whose employment has been furloughed remains an employee of the organization and is entitled to the rights as an employee. On the other hand, the person whose contract has been terminated ceases to be an employee, which means the person is no longer entitled to the rights and benefits of an employee of that organization.
Vivian Umelue is an attorney and legal templates programmer at Wonder.Legal and is based in Nigeria.