Washington, April 8: The COVID-19 pandemic continues to create havoc with the increasing number of infected people and the rising death toll across the globe. The effect of the deadly disease has already triggered a wave of layoff and businesses shutting down. According to reports, in lieu of layoff, many companies have decided to furlough employees. The situation is quite critical in the US the total US death toll from the coronavirus pandemic topped 4,000 early Wednesday, more than double the number from three days earlier. US Coronavirus Death Toll Rises to 4,000, 40% From New York State, Says Johns Hopkins.
As the virus spreads, Trump last week mentioned that the US economy is headed to a recession. Also in one week, more than three million people have filed for unemployment benefits. So what does furlough mean and how is it different from being laid off? World Is in Recession, Can be Worse Than 2009 if Coronavirus Not Contained: IMF Chief Kristalina Georgieva.
What is Furlough & How is it Different From Lay-off?
According to a report on The Cut, employers resort to furlough as a cost-saving measure. Furlough is an employer-mandated, temporary unpaid leave from work and employees working in both public and private sector can be placed under furlough. One can be furloughed for a few weeks and it can even extend to months, it typically depends on the company one is working for.
So the major difference between a furlough and being laid off is in case of furlough, you retain your job. In most cases, one also gets to retain health benefits. They also qualify for the unemployment benefits, that have been expanded under the $2 trillion coronavirus relief package passed last week.
Why Do Companies Furlough Employees?
Furloughing is no doubt used as a cost-cutting tool by companies. These firms may foresee a better economic condition in the future and therefore decide to retain the employees instead of laying them off. In the coming days, when the situation gets better and things turn positive, a company can decide to have these employees back on the payroll, instead of hiring fresh people.
GAP, Macy & Others Decide Furlough Several Employees To Tackle the Crisis
According to the latest report on the Fortune, GAP furloughed around 80,000 workers as stores remained closed due to the coronavirus spreading through North America and Europe. In addition to the furlough, the company informed that top executives of the company have to go through a compensation cut in the middle of this crisis. Departmental store chain Macy had to furlough most of its 130,000 employees in order to deal with the economic damage due to the coronavirus shutdown. The company informed that despite selling items online, it has “lost the majority of sales” due to the closure of all of its stores on March 18.
With the world moving towards a complete shutdown amid the coronavirus pandemic, the Managing Director of the International Monetary Fund Kristalina Georgieva had recently said that 'it is now clear that we (global community) have entered a recession – as bad as or worse than in 2009.' She projected a rebound in 2021 but again mentioned that it can only happen if COVID-19 is efficiently contained.