How to Approach Employee Compensation During a Furlough

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In times of economic uncertainty and crisis such as this, employers often take the extreme cost-savings measure of reducing their workforce through layoffs or furlough.

Layoffs are a severe step that triggers several administrative burdens associated with terminating and rehiring employees, such as providing required notices under state and federal law, ensuring legal requirements for employee terminations are satisfied, and incurring additional costs and delays related to rehiring.

While furloughing employees is still a drastic course of action, many companies are utilizing this alternative to layoffs because it allows them to lower expenses while still ensuring a quicker “reboot” at the conclusion of the crisis and providing employees with certain benefits while their hours and wages are temporarily reduced.

If a company decides to furlough one or more employees, it is important to maintain an open dialogue with them on a return to work to ensure the decreased work and pay are, in fact, temporary. Employers should also take steps to exhibit that it is a true furlough and not an attempt to circumvent the legal obligations associated with a layoff.

In other words, they must display hallmarks of continued employment, which may include reimbursing for mixed-use assets, as well as be prepared to compensate employees for any work they do perform while furloughed.

Displaying Hallmarks of Continued Employment

Hallmarks of continued employment are mutually beneficial and serve as an avenue for companies to prove they intend to have their furloughed employees return to work at a future date. These can include continuing to provide benefits such as health insurance to the furloughed workers and continuing to allow employees’ equity to vest.

Maintaining all possible hallmarks throughout the duration of the furlough is a good idea because eliminating wages also precludes certain other employer-offered benefits during a team member’s employment pause.

For example, employees generally are no longer eligible for a 401(k) plan because the contributions, whether matched or the sole responsibility of the employees, are drawn from payroll. While the uninterrupted benefits are advantageous to an employee on a reduced income, it also shows a business intends to continue employment if this were ever challenged.

What About Reimbursing for Mixed-Use Assets?

In today’s world, we’re more remote than ever. This is not just a result of the current environment created by the pandemic; the remote workforce has expanded significantly over the past several years, with more than 92 million mobile-enabled workers now in the United States alone. Employers have adapted to this paradigm shift by providing those employees with basics such as a computer and reimbursing them for the recurring costs associated with data and service these devices require. Read more here…

Source: HR Daily Advisor

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