Pneumonia of unknown cause was reported to the WHO country office in China on 31 December 2019. The virus was first detected in Wuhan, China. The outbreak was declared a Public Health Emergency of International Concern on 30 January 2020. On 11 February 2020, WHO announced a name for the new coronavirus disease: COVID-19. By June 2020, the economy was forced to stop literally, leading to layoffs and closures, in 130 countries.
As an alternative, many companies, to name a few, Tesla, GAP, Macy’s, and Marriott, are turning to furloughs, to make sure that their employees do not lose their jobs. UK Government is supporting the employers with huge grants to pay furloughed employees compensation.
Furloughs enable companies to reduce staff and are helpful during difficult times such as COVID 19. Scandinavian Airlines has furloughed 80 per cent of its staff while global hotel chain Marriott International has begun the same process with tens of thousands of its employees. The US department store Macy’s has started furloughing a majority of its 1,25,000-strong workforce. Garment chains GAP and Nordstrom have also taken similar steps.
According to Rohit Kapoor, chief executive officer, Oyo India and South Asia, Oyo employees will be furloughed for four months starting 4 May. According to him, “those going on this leave will avail benefits such as continuation of medical insurance and parental insurance, school fee reimbursement and ex gratia support.”
How to encourage business entities to opt for furloughs instead of layoffs, looking at its advantages both to employers and employees?
Let us understand what furlough means and how it differs from layoffs.
What is a Furlough?
In simple terms, Furlough is ‘a temporary leave from work that is not paid’. Furloughs are mandatory time off from work with no pay. They, generally, are implemented by employers as a cost-saving measure during tough economic times or otherwise slow periods for a business or a situation like the present prevalent throughout the globe.
Differences between furlough and layoff:
Furloughs differ from layoffs, in that, furloughed employees retain their jobs to resume work at some point of time in the future, while laid off employees are generally removed from the jobs. In furloughs, some companies may allow employees to retain certain benefits like health insurance, school fee reimbursement, tax benefits etc. The employees may have access to a few work-related benefits. Furloughs can take different forms, workers remain employed, but sometimes are paid less, or not paid at all, saving the company money, depending upon the severity of the situation.
Advantages & Disadvantages:
Impact of COVID on Companies:
COVID-19 pandemic has spread and is spreading rapidly throughout the world, causing death and destruction to many. It struck suddenly with people having no idea to treat it, leave alone preventing it, forcing the world indoors. According to the Ministry of Health and Family Welfare, the total number of cases as on 1st June 2020, exceeded 1,98,000 and deaths exceeding 5,000.
The impact is seen across the globe, with governments announcing lockdown, all work places were closed in short notice. Industries were shut overnight, except a few essential services. In such a situation, business entities even the top ones were finding it difficult to pay salaries for employees. The unprecedented challenges caused by coronavirus led many companies to lay off employees, where work from home is not possible. Marriott CEO describes coronavirus impact as much worse than post-9/11 attacks.
The retail, hospitality and travel sectors have been hit the hardest due to COVID-19, though the impact is seen in every sector. GoAirlines India Ltd. has asked as many as 90% of its 5,500 employees to go on indefinite leave without pay, because of government ban on flights amid a coronavirus lockdown.
Conclusion
Sandra J. Sucher and Shalene Gupta, in their Harvard Business Review (HBR) article: ‘How to Make Furloughs More Humane’ say that employers should adopt a humane approach before, during and after COVID to mitigate their suffering. Further, according to them, furloughs have become a sudden and welcome feature. Companies are able to maintain connections with their employees and at the same time cut costs. In this way, furloughs are often a much better alternative to layoffs for both companies and employees. There is no report of any Indian company furloughing its employees as of yet. India needs to think in these lines and see how best it can mitigate the problems of employees as many of the companies are laying off their employees.
References
Bloomberg Quint: GoAir to Furlough 90% of Workers as India Lockdown Extends
The Print: Companies furlough employees amid Covid-19 crisis: What it means, how it differs from lay offs
Live Mint: Oyo announces pay cuts, furloughs staff in India to save cash
The Balance Careers: What Are the Advantages and Disadvantages of Employee Furloughs?
Economic Times: Sack, furlough or reskill? India Inc’s talent dilemma
Harvard Business Review: How to Make Furloughs More Humane
The Gaurdian: Business leaders: extend furlough to avoid millions of job losses
World Health Organization: Rolling updates on coronavirus disease (COVID-19)
Discussion Questions
| Illustrate COVID-19’s impact on employees. |
| Outline the advantages of furloughs over layoffs. |
| State your views on whether it is feasible for Indian companies to adopt furloughing in times of crisis like that of COVID-19. |
| Explain how to take a humane approach while adopting furloughing. |
