The pandemic has hit businesses hard on both sides of the border. If you’re a Canadian business owner with employees in the US, you’ve likely had to become familiar with many new employment laws and regulations over the past year as you’ve struggled with reduced revenue and difficulties making payroll. In order to stay afloat, you may have taken advantage of COVID-19 tax deferrals and had to make many difficult staffing decisions, such as terminating, laying off, and furloughing employees to reduce operating expenses. 

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Now that the pandemic has been around for almost a full year, you might be acutely aware of just how long many of your employees have been off work and wondering how long they can be furloughed. Here’s what you need to know about furloughed employees.

The Basics: Furloughs

Companies furlough employees to cut costs during special circumstances, such as an economic downturn for the company or a recession. Furloughs are considered mandatory, temporary unpaid leaves of absences. During their furlough, employees will not receive their usual pay or hours of work, although they are still employed by your company. This means you still have employer obligations, such as continuing benefits. 

You are not required to set a specific amount of time when you furlough a worker.

A Temporary Leave

The most important part of the definition here is the inclusion of the word “temporary.” You cannot furlough employees indefinitely as a long-term solution for reduction of staff. They can be short or long term, depending on the financial needs of the company and how long the downturn lasts. However, the maximum duration that a company should furlough an employee is one year. 

Therefore, if you plan to recall employees to work within a year, a furlough can be a great option to reduce costs temporarily. On the other hand, if you plan to furlough them for a longer period of time, you should consider a more long-term alternative to reducing your workforce, such as layoffs or Reduction in Force (RIFs). Layoffs may be necessary if you realize that, at some point, some of the employees may be facing an indefinite furlough. 

Returning Employees

Companies often use furloughs as an alternative to layoffs because they allow the company to bring back employees quickly once the company’s financial situation starts to improve and the economy starts to recover. 

Keep in mind, though, that employees are allowed to look for work elsewhere while they’re on furlough. That means the longer you have them off work, the more likely it is that they will seek employment elsewhere. This can make it more difficult for you to resume normal operations once the situation improves.

No company wants to make the tough decision to temporarily or permanently reduce its staff, but during difficult economic times, it may be the only option in order to stay afloat. However, it’s important to note that furloughing employees for too long may hurt your employer brand and damage relationships. Furloughs should only be used as a temporary measure for reductions in the workforce lasting less than one year.