Furlough

A temporary, mandatory unpaid leave of absence — the employee remains employed but does not work or get paid for a defined period.

A furlough is a temporary suspension of work without pay, initiated by the employer. Unlike a layoff, a furloughed employee is still technically employed — they retain their benefits (in most cases), maintain their position, and are expected to return to work when the furlough ends. Furloughs are typically used when a company needs to reduce costs temporarily without permanently eliminating positions — for example, during a seasonal slowdown, economic downturn, or unexpected revenue shortfall.

Furloughs became widely known during the COVID-19 pandemic, when millions of workers were furloughed rather than laid off as businesses shut down temporarily. For employees, a furlough generally preserves health insurance and other benefits, maintains the employment relationship, and avoids the need to re-onboard when the furlough ends. Most furloughed employees are eligible for unemployment insurance during the furlough period. For employers, furloughs preserve institutional knowledge and avoid the costs of rehiring and training when business recovers.

Not every furlough works the same way. Some companies furlough employees for a fixed period with a firm return date; others leave the timeline open-ended, which effectively leaves employees in limbo. The specifics — whether benefits continue, whether accrued PTO is paid out, whether you can take other work during the furlough — should be spelled out in writing before the furlough begins. If they're not, it's reasonable to ask your employer for a written furlough agreement.

Furlough vs. Layoff

  • Furlough: temporary, employment relationship continues, benefits often maintained.
  • Layoff: employment ends — may be temporary or permanent, benefits typically end.
  • Furloughed employees generally qualify for unemployment benefits during the furlough period.
  • A furlough can convert to a permanent layoff if business conditions don't recover — get a return date in writing if possible.
  • Exempt (salaried) employees are legally tricky to furlough — reducing their weekly pay below their full salary can jeopardize their exempt status under the FLSA, exposing the employer to overtime liability.
  • Hourly employees are easier to furlough cleanly — they're simply not scheduled and not paid.

What to Do if You're Furloughed

  • File for unemployment insurance immediately — most states allow furloughed employees to collect, and waiting costs you benefits you're entitled to.
  • Confirm in writing whether your health insurance continues and who pays the premiums during the furlough.
  • Ask about PTO: some employers freeze accrual during furlough, others allow you to use accrued time.
  • Clarify whether you're allowed to take other work — many furlough agreements prohibit working for competitors.
  • Keep your skills current: use the furlough period to take courses, update your portfolio, or expand your network.
  • Set a calendar reminder for your expected return date — and follow up proactively if that date passes without contact.

COBRA and Benefits During a Furlough

Whether your employer-provided health insurance continues during a furlough depends on the company's plan documents. Many employers maintain coverage during short furloughs as goodwill; others drop coverage, which triggers a qualifying life event under COBRA. If your coverage lapses, you have 60 days from the loss of coverage to elect COBRA continuation coverage, which lets you keep the same health plan — but you'll pay the full premium (employer + employee share) plus a 2% administrative fee. This is often significantly more expensive than what you paid as an active employee, but it keeps you on the same plan and avoids a coverage gap.

Example

A hotel chain furloughs its event staff for three months during a slow season. The employees remain on the company's books, keep their health benefits, and receive unemployment insurance to partially replace lost wages. When bookings recover, they're called back without going through a new hiring process.