This document provides information and advice about handling a furlough. It defines a furlough as a temporary reduction in work hours and pay, usually due to an economic shock like COVID-19. There are two types: full furlough with no work or pay, and partial furlough with skipping some workdays without pay over a defined period. The document then outlines benefits to employers and workers, disadvantages to workers, eligibility for unemployment benefits including the enhanced COVID benefits, and a 10-step action plan for furloughed workers covering finances, insurance, taxes, creditors, skills development, and self-care.

1. Dr. Barbara O’Neill, CFP®, AFC®
@moneytalk1
How to Handle a Furlough:
Develop a Plan

2. What is a
Furlough?
• Temporary reduction in work
hours and pay, usually caused by
some type of economic shock
(e.g., COVID-19, recessions)
• Workers are still employed vs. a
layoff (i.e., total loss of a job)
• Employee benefits (e.g., health
insurance) may continue
• Often called “temporary layoffs”

3. * Full Furlough- No work (and no pay) at
all indefinitely “until things get better”
Example: Disney furloughed 100,000
theme park and hotel workers (4/20)
* Partial Furlough-Skip [X] workdays (and
don’t get paid) over [a defined period of
time]; e.g., take 35 unpaid days without
working over the next 12 months
Example: Univ. of AZ furlough program
for 2020 and 2021 with the number of
unpaid days based on salary range
Two Types of
Furloughs

4. Question:
Have You or a Family Member Been
Furloughed?
If Yes, Describe the Process

5. Furlough
Benefits to
Employers
• Reduces payroll costs
• Provides flexibility to manage labor
costs
• Avoids the administrative costs of
terminating workers
• Avoids “starting from scratch” with
onboarding when business picks up
• More “humane” way to treat workers
• “An Act of Hope” that the business
will survive (layoffs later could occur)

6. Furlough
Benefits to
Workers
• Workers are still technically employed
• Health care benefits may continue
(based on terms of group plan, flexible
spending account, union contracts)
• Other benefits (life and disability
insurance) may also continue as per
documents and insurance contracts
• Workers may feel more valued/less
abandoned than in a layoff situation
• Often eligible for unemployment
benefits

7. Furlough
Disadvantages
to Workers
• Pay cut, first and foremost
• No guarantee a furloughed worker
will get rehired, especially initially
• It’s like playing “Musical Chairs” with
fewer chairs when a business first starts
back up (Zandi)
• Full furlough: can’t contribute to
retirement plans (no paycheck)
• Employees must generally the pay
employee cost of health insurance
premiums via employer’s process

8. Other Key
Points About
Furloughs
• May or not have a “return date” or
“end date” and dates can change
with economic conditions
• Lost wages are usually not
reimbursed later (exception: some
government shutdowns)
• Morale issues, especially if workers
perceive inequitable treatment
• Sometimes voluntary (i.e., employers
ask for volunteers to work less ) but
typically mandatory

9. Furloughed
Workers are
Eligible for
Unemployment
Benefits
• Apply in the state where you work-
NOT where you live (if different)
• Benefits vary by state: $378/wk is
national average vs. $213/wk in MS
(lowest) and $555/wk in MA (highest)
• Expect a Form 1099-G next year
reporting unemployment benefits for
this year, which you'll report on
Schedule 1 of federal 1040 tax form
• State laws vary on benefits for partial
furlough pay reductions (e.g., 20%)
while workers are still employed

10. COVID-19 Furlough
Unemployment
Information
(CARES Act)
• $600 a week enhanced benefit on top
of regular state unemployment
benefits until 7/31/20
• Additional 13 weeks of payments from
states, up to a maximum of 39 weeks
• Expands eligibility to include self-
quarantine orders, care for a
diagnosed family member, and care of
children unable to attend school
• Waives the typical one-week waiting
period for benefits

11. What to Do?
Develop a 10-Step
Furlough Action
Plan

12. Step #1:
Calculate Your
Dollar Loss
(Partial
Furlough)
• Figure out what you earn in a day
after taxes:
Divide annual gross income by 260 (number
of work days)
$40,000 ÷ 260 days = $154
Subtract taxes on gross income based on
federal marginal tax rate
$154 – ($154 x .22 or $34) = $120
• Multiply by number of furlough days
$120 x 20 unpaid days = $2,400
• Note: This is an approximate figure;
does not consider other payroll taxes

13. Step #2: Seek
Information
• When furlough will start
• Low long furlough will last
• Choice (if any) of days taken off
• Extension of employee benefits and
for how long
• Process for paying health insurance
premiums
• Borrowing from employer plans
• Employer-specific policies

14. Step #3:
Spend Less
• Try to reduce spending by amount of
lost income, if possible.
• Prepare a post-furlough spending plan
with reduced income, changed
expenses, & CARES Act moratoriums
• Start expense cutting with variable
expenses
• Track income and expenses and adjust
as needed

15. Step #4: Suspend
Voluntary
Deductions
(Partial
Furloughs)
Consider temporarily suspending (or
reducing) voluntary payroll deductions
• Automated charitable contributions
• Automated credit union deposits
• Automated retirement plan deposits
• Tax over-withholding

16. Step #5: Seek
Side Hustle
Income, If
Possible
• Try to ramp up an existing side
hustle
• Start a new side hustle
• Look for growth opportunities in a
poor economy
• Respect employer conflict of
interest policies and non-compete
contracts

17. Step #6: Stay
Insured
• Take advantage of employer insurance
continuation for as long as it lasts
• Find out how to pay premiums
without a paycheck
• If health insurance ends, transition to
COBRA (up to 36 months) or the ACA
Marketplace
• ACA coverage with a subsidy
(especially if you have no income) will
be much more affordable; go to
www.healthcare.gov

18. Step #7:
Adjust Your
Income Taxes
• Take out or set aside withholding for
taxes on unemployment benefits
• Complete a new W-4 form when you
are rehired (full furlough) or to
account for a reduced income (partial
furlough)
• Take advantage of income-based tax
credits that a furlough may have
made you eligible for
• Earned Income Tax Credit
• Saver’s Credit

19. Step #8:
Contact
Creditors
• Call creditors and utilities and explain
your reduction (or loss of) income
• Ask for flexibility until you get back
on your feet
• Do not agree to repayment terms
that you cannot afford
• Take good notes about extra fees and
interest and new repayment terms
• Ask whether delayed payments will
be reported to credit bureaus

20. Step #9: Build
Your Human
Capital
• Don’t sit back and wait for a worker
recall; it may be a long while
• Use free time to “upskill yourself”
and prepare for your next position
• Webinars, certification program,
tech tinkering, etc.
• Focus on gaps in your skill set
• Make yourself as marketable to
employers as possible

21. Step #10:
Savor the
Extra Time
• Resist the urge to work on furlough
days; e.g., e-mails and phone calls
(employers prohibit this)
• Enjoy walking or other physical
activity
• Take online courses
• Spend extra time with family and
friends
• Binge-watching television and movies
• Home maintenance activities

22. Question:
From Your Experience….What Other
Tips Would You Give to Furloughed
Workers?

23. Furlough
Resources
Money Talk Blog Post:
https://moneytalk1.blogspot.com/2020/04/how-to-handle-
furlough-develop-plan.html
Wall Street Journal Articles:
https://www.wsj.com/articles/furlough-time-off-once-
temporary-but-now-often-unclear-11587733200
https://www.wsj.com/articles/call-it-a-layoff-a-furlough-or-a-
cut-shift-americans-are-losing-work-11584550057
CBS News Article and Video:
https://www.cbsnews.com/news/furlough-unemployment-
layoff-coronavirus/
Coronavirus Anxiety Workbook:
https://thewellnesssociety.org/wp-
content/uploads/2020/04/Coronavirus-Anxiety-Workbook-
1.pdf

24. AFCPE Resource
https://www.yellowribbonnetwork.org/afcpecovid19

25. Questions?
Comments?
Experiences?