Furlough vs Layoff: Pay, Benefits and Unemployment Compared
Furloughed, temporarily laid off or permanently cut: the label decides whether you keep your health plan, how unemployment treats you and when the WARN Act starts to count.
A furlough is unpaid time off during which you remain an employee, while a layoff ends the job, either for good or with an expected recall date. Furloughed workers often keep their health plan and can usually collect unemployment for weeks with no work. The terms that apply to you are in the employer’s furlough or layoff notice, the benefit plan documents and, for union members, the labor contract.
Employers use the words loosely. A “temporary layoff” with a recall date works much like a long furlough, and a furlough that drags on can become a layoff in all but name. What matters legally is whether you are still on the payroll, how long the break lasts and whether hours are cut or eliminated.
What is the difference between a furlough, a temporary layoff and a layoff?
The main difference is whether the employment relationship continues. In a furlough you stay employed and expect to return; in a permanent layoff the job is gone and the employer owes final pay under state law.
| Furlough | Temporary layoff | Permanent layoff | |
|---|---|---|---|
| Still employed? | Yes | Depends on the employer; often treated as separated with a recall date | No |
| Pay | None for days or weeks not worked | None | Final paycheck, plus severance if a plan or agreement provides it |
| Health insurance | Often continues; set by the plan’s eligibility rules | May continue for a period, or COBRA is offered | Ends; COBRA is offered if the employer is covered |
| Unemployment | Usually eligible for weeks with no or reduced work | Usually eligible; work search may be waived with a recall date | Usually eligible |
| WARN Act | Counts only if it becomes a layoff over 6 months or a 50%+ hours cut over 6 months | Counts if it lasts more than 6 months | Counts toward mass layoff and plant closing thresholds |
| Recall | Expected return date | Recall date or recall list | No right to return unless a contract or local law gives one |
Do you keep health insurance during a furlough?
Often yes, but the plan document decides. Group health plans set eligibility by employment status and hours, and many keep furloughed employees covered for a stated period. Some employers keep paying their share of the premium; others bill the employee for the full contribution or deduct it after the return to work.
If the furlough or the cut in hours makes you ineligible under the plan, that loss of coverage is a COBRA qualifying event. A reduction in hours triggers COBRA in the same way a termination does, as long as the employer had 20 or more employees and the plan is covered. Our guide to COBRA after a layoff lists the notice and election deadlines.
Ask HR three questions: how long coverage continues during the furlough, who pays the premium, and what happens to life insurance, disability coverage and retirement contributions in the meantime.
Can furloughed workers collect unemployment?
In most states, yes. Unemployment insurance pays people who are out of work or working reduced hours through no fault of their own, and a furlough with no pay usually qualifies, subject to the state’s wage and availability tests. A partial furlough, such as one unpaid day a week, may qualify for a partial weekly benefit if earnings fall below the state’s limit.
States differ on job-search rules for workers who expect to return. Wisconsin is one example: its unemployment agency waives the work search for 8 weeks if you will be recalled within that time, and an employer can ask for a longer waiver of up to 12 weeks by confirming a return-to-work date, according to the state Department of Workforce Development. Other states use their own windows, so check your state agency through CareerOneStop’s unemployment benefits finder.
File in the first week without pay, even if the furlough is short. Most states pay only from the week you file. Our guide to filing for unemployment after a layoff covers what to have ready.
When does a furlough count under the WARN Act?
A furlough counts as a job loss under the federal WARN Act only when it turns into a long break. The Labor Department’s rule at 20 CFR 639.3 defines an “employment loss” as a termination, a layoff exceeding 6 months, or a cut of more than 50% in an employee’s hours during each month of any 6-month period.
That means a 3-month furlough does not trigger the 60-day notice requirement on its own. A layoff announced as 6 months or less that is later extended past 6 months is treated as an employment loss under 29 U.S.C. 2102(c), unless the extension was caused by business circumstances that were not reasonably foreseeable when the layoff began and notice is given once the extension becomes foreseeable. The thresholds and the 60-day rule are explained in our page on WARN Act notice rules. Several states have their own notice laws with different triggers.
Can a salaried employee be furloughed for part of a week?
Only with care. Under the Fair Labor Standards Act, an exempt salaried employee who does no work at all in a workweek need not be paid for that week, according to the Labor Department’s Fact Sheet #70 on furloughs. Docking salary for part of a week in which the employee works generally puts the overtime exemption at risk, with narrower rules for public employers on budget-required furlough days.
Hourly, non-exempt employees are paid only for hours worked. The same fact sheet says that doing normal job duties on a furlough day counts as work. Answering work email or taking calls on an unpaid day can therefore create a right to pay for that time.
Do you have a right to be recalled after a furlough or layoff?
Not under federal law. A recall right comes from a contract or from a specific state or local law. Union contracts usually set seniority-based recall lists, how long a laid-off member stays on the list, and how notice of recall is given. Some cities and states have passed recall laws for particular industries, mainly hospitality, so check with your state labor department.
For non-union employees, the furlough letter is the main source. It should state the expected return date, whether the employer can extend it, and whether refusing a recall affects benefits. In most states, turning down an offer of suitable work can end an unemployment claim.
Bottom line
Keep the furlough letter and any extension notices, because the 6-month mark is what separates a furlough from a WARN employment loss. If you have paid time off, ask before the furlough starts whether the employer requires or lets you use it, since PTO paid for a week can reduce or delay unemployment for that week in many states.
FAQ
Is a furlough better than a layoff?
It depends on what you need. A furlough usually keeps health coverage and seniority, while a layoff ends the job but may come with severance and a final payout of accrued vacation where state law requires it.
Can I work another job while furloughed?
Usually yes, unless your employer’s policy or a non-compete limits outside work. Earnings from a second job are reported on weekly unemployment claims and reduce the benefit under your state’s formula.
Can a furlough turn into a layoff?
Yes. Employers can convert a furlough to a permanent layoff, and once a layoff runs past 6 months it counts as an employment loss for WARN purposes. At that point final pay rules and COBRA timing apply.
Do I accrue vacation during a furlough?
Accrual rules are set by the employer’s policy. Many plans stop accruing PTO during unpaid leave, so check the handbook or ask HR in writing.
