Companies turn to furloughs to save money, jobs

Raleigh, N.C. — Some businesses and government agencies are imposing furloughs to reduce expenses during the worsening recession. A furlough is a leave of absence from work – without pay – that is done as a cost-saving measure.

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Companies use furloughs to weather recession

Some lawmakers have said they prefer furloughs to laying off state workers. A bill pending in the House would enable the governor, the state Supreme Court chief justice and legislative leaders to furlough workers in an emergency.

“I sure hope we get that, and I think that would be supported by a lot of people who work in the university,” University of North Carolina system President Erskine Bowles said.

The North Carolina Biotechnology Center is among a number of companies that have recently started furloughs after asking employees about cost-cutting.

“One of the ideas surfaced was why don't we have a one-day-a-month furlough without pay? Senior staff and I looked at it and we said, 'That's a pretty neat idea,'” Biotech Center President Norris Tolson said.

“I don't think anybody is hoping to get a furlough message from their employer,” attorney Bob Sar said.

Sar handles employment issues and says that with a furlough, the business gets the benefit of salary reduction without losing employees through layoffs.

“Think of it like a temporary, unpaid leave. Not a paid vacation, but time off. You're going to shut down a facility for one day a week, or go to a reduced work force,” Sar said.

The employee keeps his or her job. While employers have flexibility in how they structure a furlough, Sar says, the law does require proper notice and an understanding by both sides – that time off, means time off.

“You really shouldn't perform any work during that time," Sar said. "So if you've told them that we're not gonna pay you for that Friday and they actually come in and work, or they do extensive checking of voice-mails or some long BlackBerrying, you need to pay them those wages. They're entitled to it."

While not ideal for everyone, Sar says he sees furloughs as more generous, creative and hopeful than layoffs.

“I think the silver lining to a notice of a furlough from an employee's perspective is that, 'Hey, my employer thinks things are gonna get better. We're not taking a drastic elimination of jobs across the board,'” Sar said.

In North Carolina, workers cannot collect unemployment benefits during a furlough. However, Sar says furloughs do not typically impact health benefits.

As for whether they can truly impact the bottom line, Bowles told lawmakers that furloughs could save the UNC system $8 million a day.