Of the 87 firms in the S&P 500 to announce staff reductions from early March through the end of June, 65 chose to furlough workers, according to an analysis of securities filings by data provider MyLogicIQ, the Wall Street Journal reported. In June, 10.6 million workers were temporarily laid off, meaning they expected to be recalled to their jobs, down from a peak of 18.1 million in April, according to the U.S. Labor Department. The jobless rate fell to 11.1 percent from 13.3 percent a month earlier, the department said. Even though a furlough is a continuing expense, the costs of one-time layoffs can add up quickly, outweighing the intended benefit, said Richard Cardillo, principal for the Hackett Group, a consulting firm. A layoff takes time to execute and typically involves some lump-sum severance payment to terminated workers. And if the company has to rehire staff a few months later as demand ramps up, those recruiting and training expenses add to the cost of the layoff, Cardillo said. In such instances, a furlough is more cost-effective, he said. Furloughs are also treated differently under U.S. labor laws. A furlough is considered a temporary action and can be executed with little delay. By contrast, federal and state laws require companies to give workers 60 days of notice or more before a layoff under certain circumstances. A company’s cash balance ultimately dictates whether workers are furloughed or laid off, Cardillo said. Companies that don’t expect revenue to recover to pre-pandemic levels may be forced to lay off employees who were temporarily furloughed, he said.
