Definitions of furlough, layoff, and leave in Canada

Here are the definitions of furlough, layoff, and leave in Canada:

Furlough

To furlough an employee in Canada simply means to give them a temporary leave of absence for several weeks or months without pay. The relationship between the employer and furloughed employees continues, but the employees do not receive their pay during this time. However, furloughed employees are eligible to receive employee benefits and insurance coverage during the furloughing period. Furloughs are highly effective in situations when the employer does not have adequate funds to sustain a payroll or during slow periods when there is not enough work for employees.

Layoffs

Layoffs are the exact opposite of furloughs. It generally involves permanently terminating the relationship between an employer and employee due to lack of work or adequate funds for payroll. Most employers eventually look to refill those laid off positions once their financial and work conditions have improved, so the layoff may occasionally work as a temporary solution. Many employers may also offer their laid-off employees temporary benefits or compensation packages to help them as they transition from losing a job to finding a new one.

Leave

Unlike furloughs and layoffs, which are usually involuntary, leaves can be voluntary or involuntary. Under the Canadian labour code, employees are eligible for annual paid leave of up to 19 days. Moreover, an employee can request time off work due to illness, emergencies, maternity, bereavement, parental responsibilities, caring for sick family members and voting. Different types of leaves have varying conditions in terms of payments and employee benefits. Depending on the type of leave and the leave policy in each territory or province, the employee who is granted the leave may or may not receive pay during off days.

Differences between furloughs, layoffs, and leave

Typically, a furlough is a mandatory, temporary leave of absence that takes between 13 to 35 weeks of the 52 weeks in a year. Some furloughs may become permanent depending on the company’s financial circumstances. In comparison, a layoff is generally a permanent discharge of an employee due to economic or work conditions. However, some layoffs may be temporary if a company experiences financial improvement and can afford to hire back those employees. A regular leave of absence in Canada takes up to 19 days and the employee continues to enjoy their pay and benefits during this period.

Furloughs are more complex to implement compared to layoffs, since the employer must define the period of the leave and decide whether to pay affected employees during this period. Deciding what positions to furlough and communicating the decision to the affected employees can also be a challenge for employers. Layoffs are less complex to implement since the employer can easily tell what departments of the business do not have work or are running low on funds. Laid-off employees who have worked for 12 consecutive months before the termination of their contract can collect severance pay.

The advantages and disadvantages of furloughing employees

There are several advantages and disadvantages of furloughing your employees:

Advantages

Reduced costs

The main benefit of furloughing employees revolves around cutting costs until the company returns to financial stability. The company can use this time to save money spent that they would otherwise have spent on paying employees.

Minimized need for new recruitment

Since furloughs are temporary layoffs, the employees are usually set to return after some time. This means the company may not have to go through the costly process of recruiting new employees.

Continued employee benefits

Employees can also benefit from furloughs. In most cases, they are eligible for continued benefits and insurance coverage. Some companies can decide to pay their furloughed employees a certain percentage of their wages during this period.

Assured return of employees

Depending on the employer-employee relationship, the company can look forward to the return of its employees after the furloughing period elapses. The employees can also have peace of mind knowing that they still have a place in the company and will return to work soon.

Disadvantages

Complex process

Furloughs are sometimes complex since they have strict guidelines on how to implement them. The employer must adhere to these guidelines to avoid possible lawsuits.

Lowered employee morale

Furloughs create an unstable work environment and the remaining employees can lose morale seeing their workmates going home for an indefinite period.

Loss of valuable employees

Companies stand the risk of losing their most competent employees if they decide to furlough them. The employees can seek employment elsewhere instead of waiting for the furlough period to elapse.

The advantages and disadvantages of laying off employees

Advantages

Cost-cutting benefits

Layoffs offer plenty of cost-cutting benefits. Aside from reducing the company’s payroll, the employer will not be responsible for continued employee benefits and insurance coverage.

Improved business reputation

Although laying off employees is sometimes a necessary decision, being clear, honest, and respectful during the laying off process can prevent damage to the reputation of the company. Done properly, it may also help to ease the stress on employees affected by the business decision.

New career opportunities

For laid-off employees, this is a chance to pursue a new career path. They can use the time to reevaluate their career goals and take the necessary steps to achieve them, whether that be to seek a similar job or explore a completely different career.

Disadvantages

Cost of hiring new employees

A company may eventually need to hire new employees after the layoff process has completed, and they have financially recovered. Businesses need to consider the costs of of hiring new employees, like their salaries, benefits, and bonuses, all of which can be costly.

Loss of valuable employees

Layoffs sometimes means losing the most competent employees. The company has to train new workers to understand the culture and duties of the business, and this could be expensive.

Increased workload

Remaining employees may have to fulfill additional duties previously held by the laid-off employees. This increased workload may require additional working hours and even overtime in order to complete by deadlines.

Alternatives to furloughs and layoffs

While furloughs and layoffs are usually the most effective options available, you can also consider these alternatives:

Reduced work hours

Instead of furloughing or laying off employees, the company can decide to reduce work hours. This reduces administrative costs without compromising essential business operations.

Emergency leave

Emergency leave is a type of protected leave under the Employment Standards Act (ESA). Employees can take emergency leave once the province declares a state of emergency following a pandemic like COVID-19. During this period, the employee is eligible for continuous group benefits.

Wage reductions

Pay reductions across the entire organization can help keep the business functioning without interfering with operations.