Furlough Vs Layoff: What Are The Differences

Economic uncertainty brings with it job insecurity, which is unsettling for anyone whose position may be at risk. During the coronavirus pandemic, we have all become familiar with the term ‘furlough’, which the government has used to try and prevent unemployment. Here we look at the differences between being put on furlough and being laid off. 

What is furlough?

When you are placed on furlough, you temporarily stop working but keep your job to return to when circumstances change. You can also be placed on flexible furlough which means you work some of your usual hours and are placed on furlough for the rest of them. During your furlough you will be paid an agreed amount, for example during coronavirus lockdowns the government covered 80% of an employee’s wages which their employers could then top up. 

As well as employees, agency workers, people on zero-hours contracts and apprentices are all eligible for the current furlough. If any of these apply to you and your job is at risk, it’s worth asking your employer to look into the government’s job retention scheme if they haven’t already. Only an employer can apply for furlough.

What does layoff involve?

You can be laid off by your company if there is not enough work for you, but the hope is you will be taken back on at a later date. A lay off applies to at least one full day not working, if hours have been reduced it is known as short-time working.

What you will be paid depends on what is in your contract of employment. However if reduced pay has not been agreed you are entitled to full pay.

If your contract says layoffs are unpaid, the government provides statutory guaranteed pay of £30 a day for five days in any three month period, although you cannot do any work on these days.    

There is no time limit on how long you can be laid off for, but if you have been laid off for more than four weeks consecutively, or for six weeks in a 13 week period, you can claim redundancy.

What are the key differences?

It very much depends on your contract and circumstances but furlough usually offers more security.

Not only does the government retention scheme guarantee your pay, your employer will continue to contribute to benefits such as a pension. However the furlough scheme is only a temporary measure, in more normal times you’re more likely to face a lay off or redundancy.

During a layoff, it is unlikely any employee benefits will be continued unless this is in your contract. In sectors where periods of downtime are expected such as construction or seasonal industries, your contract will probably stipulate you are not entitled to pay during a layoff.

However, you can claim benefits such as Universal Credit and find other work as long as you are able to return to your normal job when needed. If you don’t return your employer can claim you have resigned which means you’ll no longer be entitled to redundancy. If you’re not sure what benefits you might be eligible for you can use a benefits checker to find out.

Claiming redundancy

If you decide to claim redundancy during a lay off there are several things to consider. For example, your employer does not have to take you back on if work picks up again. Also, you are only entitled to statutory redundancy pay if you have been employed for two years or more.

Statutory redundancy pay is based on your total earnings before tax and worked out by your age and length of service: people up to age 22 receive half a week’s pay per full year worked, 22 to 41 year olds receive one week’s pay per year and those over 41 receive 1.5 weeks’ pay per year. This is the minimum an employer is obliged to offer you.

Working with us

Whether you are facing furlough or a layoff, job insecurity can be extremely stressful. If you are already struggling financially it can be a particularly difficult time.

If you own your home, selling it is one way to help you access much needed funds in difficult times. We specialise in buying homes quickly, in just seven days if necessary. Not only will you turn the value of your home into money you can use, but your costly mortgage payments will also stop.

What’s more, because we always buy from our own cash funds we are never part of an unreliable chain of transactions. That means you can be sure your sale won’t fall through and that your completion date won’t change.

We’re used to helping people in difficult home-selling situations and aim to take as much stress out of the process as possible. If you’d like to have a chat about our service and how we might be able to help you, please get in touch.