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Furlough Vs. Layoff: How to Handle Unpaid Time off

 Published on March 27, 2019

You’ve probably heard of living paycheck to paycheck, but what about living no-paycheck to no-paycheck?

For 35 days, that’s exactly what thousands of government employees faced during the most recent government shutdown. But they aren’t the only ones to experience a temporary forced leave from work. Workers from any sector and industry may face a furlough during their careers.

When an unexpected furlough occurs, it may put a strain on your finances, and you may be tempted to secure a personal loan to take off some of the pressure. While this is one method of dealing with unpaid time off, there may be better coping methods.

Before you see what we can do for you, check in with our guide to managing unpaid time off first. With tips ranging from preventative steps you can take before a furlough to practical advice for when you find yourself in the thick of things, there’s help in sight!

What is a furlough?

For many people watching the news, it’s the number one question of the day.

The Oxford Dictionary defines a furlough as a:

"Leave of absence, especially that granted to a member of the services or a missionary"

This definition barely scratches the surface of what it means. When put in practice, it’s a short-term yet mandatory absence during which you won’t collect pay. You may, however, continue to receive benefits.

The most headline-worthy furlough is the recent government shutdown that affected some 800,000 federal employees. It, like other shutdowns, occurred when Congress failed to agree on a budget, and non-excepted (more commonly known as non-essential) government employees and contractors were placed on unpaid leave. Excepted, or essential employees, are forced to work in their positions throughout a furlough because they’re integral to the safety of others or property.

While the government shutdown has taken center stage, it’s not the only way people experience furlough. The private sector also uses furlough to accommodate:

  • Planned seasonal downturns in business
  • Unplanned economic factors that may affect a company’s ability to operate and pay employees
person reading dictionary

What is a layoff?

The Oxford Dictionary defines a layoff as:

"A temporary or permanent discharge of a worker or workers"

By its definition, it sounds very similar to a furlough. While they both involve a stoppage of work, that’s where the overlap of these two terms end.

A layoff is a kind of termination that usually coincides with company downsizing or restructuring; an organization may layoff an employee if there’s no work available or if their position has been made redundant. While most commonly seen in factories, layoffs can affect any trade. Most recently, sister companies Buzzfeed and Huffington Post laid off more than 1,000 employees.

Unlike getting fired, getting laid off usually doesn’t reflect your performance at work. And unlike a furlough, a layoff is rarely temporary. While a furloughed employee will most likely return to their position, a layoff may be temporary or permanent, which means there’s no guarantee a laid-off employee will return — so it is likely that most of the journalists laid off from Buzzfeed or Huffington Post need to find another job.

Do furloughed employees get paid?

The short answer is no.

The long answer is a little more complex depending on your employer.

In the private sector, furloughed employees usually don’t get paid.

a personal check

In the public sector, you may have more protections as an employee of the government. All essential employees receive back pay for the mandatory work they perform during the shutdown. And thanks to new legislation signed by Trump, non-essential employees will receive back-pay as well for the most recent shutdown.

However, in both cases, you won’t receive anything until the shutdown comes to an end, and the government resumes funding for your department.

How long can a company furlough an employee?

“How long can this last?” is often a question on the tip of furloughed employees’ tongues. You may be disappointed to learn there isn’t a set limit.

However, there is a silver lining — remember, a furlough is not synonymous with a lay-off. While the latter is a long-term (if not permanent) decision, a furlough is supposed to be a short-term experience.

That being said, its length may depend on other factors, including your sector, industry, and employee status.


Some employers use furloughs sparingly in the form of singular unpaid days off, while others enforce it to accommodate routine seasonal downturns.

Longer furloughs occur regularly in the tourist industry. It’s not unusual for people who work at an outdoor tourist site to see their hours reduced or put on hold during the winter if business slows.

In terms of government shutdowns, it depends on how long it takes Congress to agree on a budget. This latest one is already one for the books as the longest lasting shutdown in the country’s history. On January 12, it surpassed the previous record holder that lasted 21 days in 1995.

Although neither the Republicans or Democrats want another shutdown to resume so quickly after the last one, there’s no law stopping it from happening again. At the time you’re reading this, a second shutdown may occur or has already happened.

What can you do?

To say a furlough is stressful and frustrating would be understating the issue. As an online loans lender, we understand financial emergencies are some of the most nerve-wracking things you’ll experience in your life. That’s why we’ve compiled tips that are geared towards helping you endure any unpaid time off with greater confidence.

How to prepare proactively for a furlough

If you work in an industry or position that undergoes periods of furlough, part of your financial plan should involve prepping your finances for these unpaid stretches of time.

two people stacking coins

Setting aside money from each paycheck towards a savings account is the cornerstone of good money management, regardless of your working situation. A common budgeting rule of thumb is the 50/20/30 rule which recommends saving 20 percent of your income and splitting it across rainy-day funds, debt reduction, and long-term savings plans like retirement.

An emergency fund may act as your “paycheck”

Depending on how long your furlough is, and how large your emergency fund ends up being, you may be able to use these savings to cover the necessities without any issues.

If your planned furlough coincides with unexpected demands on your budget, your savings may not be enough to cover everything on your plate. This may put you in a tenuous position if these unexpected expenses are essential repairs or bills you can’t ignore.

While your employment situation may complicate borrowing cash with mainstream banks, you may find it easier to secure a cash loan online. As an online lender of installment loans and personal lines of credit, we flip the script on what’s expected of our borrowers. If the furlough hasn’t affected your most recent pay date — and you can establish a consistent pay frequency — you may qualify for one of our loans.

Otherwise, check to see how robust your emergency fund is, and ask yourself:

Would my savings be able to cover a furlough and unexpected repairs simultaneously?

If the answer is no, then you may want to tweak your savings plan to set aside more cash into your rainy-day or emergency fund. If you’re able to increase your savings, your emergency fund may help you cover any unexpected bill or repair, as well as extended periods of unemployment, without outside help.

How to cope with an ongoing furlough

If you’re currently on furlough or you’ve been laid off, there is little overlap with the advice above. Without a regular income, you may not be able to contribute to your emergency fund as usual.

This is the time when you may have to tap into your savings until work picks up again. However – and this is especially the case if your furlough or layoff is unplanned – you should take the following four steps to help relieve some of the pressure of living without a regular paycheck.

1. Trim all of the fat from your budget

Spending less is the first step to managing your loss of pay. By cutting your budget down to the bare essentials, you’ll have a smaller list of bills to pay, and you may not have to use as much as your savings to cover them. This could help your savings withstand this unexpected time off.

wallet in a clamp

This isn’t always easy, but it’s possible with hard work. Take the time to learn about your financial health by looking at your budget. Identify your main priorities, remembering the safety and comfort of your family takes precedence over everything else.

Try separating your budget into your needs and wants. Generally, the needs are those essential expenses you must pay, while the wants are fun things you could survive without.

Below is a look at both to help you recognize the distinction.

Housing costsDesigner Clothing
UtilitiesSubscriptions (Streaming, magazines, etc.)

Depending on your lifestyle, your needs and wants may differ from the table above. When in doubt, eliminate anything that doesn’t relate directly to the essentials like shelter, health, or food.

2. Address your remaining responsibilities

Even if you slash your budget generously by removing all the non-essential items, a long list of responsibilities may remain. Your next step should involve prioritizing your needs, so the most important things are taken care of before your lesser responsibilities.

For example, paying to keep the lights on and food on the table likely should supersede paying off your credit card balance in full. While the latter may affect your credit score, it doesn’t have immediate consequences for the safety and health of your family in the same way that the loss of utilities and food would. And besides, your credit score is also something you can salvage with hard work.

paying an invoice on a smart phone

If you have a confirmed date for when your furlough will end, borrowing from friends or family may be an alternative way to cover your bills. Ask them if they’d be willing to help you until your furlough ends; if they’re in a comfortable financial position, they may be able to float you enough cash to act as a bridge between your savings and bills.

However, this may not be an option for everyone. if you’re dealing with a government shutdown — or a layoff with no end in sight — using a payday loan to help bridge the gap may be a way of coping. A payday loan is tied to your next pay date. Without one guaranteed, you may not be approved for this kind of loan, nor would you want to accept terms that you know you can’t meet.

3. Research furloughed unemployment opportunities

Your budget is a balancing act between your income and your spending. Now that you’ve removed any unnecessary expenses from your budget, it’s time to look at the other part of this duo: your income.

While your regular paycheck may be tied up in a furlough, there may be opportunities to access more money in the following ways:

Approach # 1: Apply for unemployment benefits

If you have access to unemployment benefits, it may be time to apply. Just keep in mind, it may take a couple of weeks before these benefits come into effect. And if you’re deemed an essential worker, you may not be able to collect it at all according to federal guidelines — it depends on your state.

Without unemployment insurance, you may want to supplement your rainy-day fund with a personal loan. If a payday loan would be too hard to repay by your next pay date, and your loved ones can’t help, an online installment loan may be a practical alternative. These short-term personal loans have a potentially more forgiving repayment schedule that coincides with multiple pay dates.

Most online installment loan lenders encourage you to use your emergency fund first before relying on any personal loans, as this will help you avoid adding another bill to your plate. After all, you’ll have to pay it all back, plus interest and fees, later on. However, installment loans may be used to cover unexpected bills or repairs that occur in addition to your regular responsibilities.

Approach #2: Bring in another stream of income

As a non-essential government employee, a furloughed worker in the private sector, or someone who’s been recently laid off, you’re likely staying home during your usual work hours.

two dogs being walked

You may be able to take advantage of this time away from work by getting a side job to tide you over until your employment status changes. There’s no need to interview for a similar position to what you have now. You might be able to earn extra cash when you:

  • Look after neighborhood children: If you’re already at home looking after your own kids, you may as well ask your neighbors if they’d be willing to pay you to watch over their children as well. Childcare can be very expensive, so you may be able to attract a lot of interest by charging an affordable rate.
  • Clean houses: Post flyers in the neighborhood and publish free ads online for your cleaning services. Check in with this guide to determine how much you should charge.
  • Dog walk: Fur-babies need looking after, too. Try using a website like Rover to connect with pet owners in your area who are looking for a dog walker or a pet-sitter.
  • House-sit: There are also online services that set you up to house-sit unoccupied homes in your area. With preferences that allow you to set distance and duration limits, you may find something that matches your furlough perfectly.
  • Side hustle: If you have an in-demand skill, you might be able to find freelance work online. There’s really no limit to who can side hustle — as long as you know how to market your skills, you might find work as a data analyst, aesthetician, math tutor, IT specialist, and more!

Whatever you decide to do, make sure your new job doesn’t have a conflict of interest with your government position. The government has a strict code of ethics that may prevent you from getting a second job.

Approach # 3: Change careers

Did any of the above suggestions ignite a spark of passion? If so, it may be time to think about where your career is headed.

Whether you work in the public or private sector, you should determine if your current position is right for you. If you’re struggling with financial issues, working in a job that has the potential for furlough may not be in your best interest.

You may want to take your time away from your job to begin searching for another full-time position with a company that doesn’t put employees on furlough. Check out these job boards to see if any organization is hiring for a similar position to what you have now.

a resume and charts on a table

Making a lateral move from your current company to a new one will ensure you bring in a comparable salary. And without the risk of furlough, you may not have to rely as regularly on your emergency fund.

Although job searching is rarely fun, your current situation may give you the motivation to spruce up your resume and apply. Who knows — you might even find a position that pays better than your first one!

4. Talk to your creditors

If cutting your spending and boosting your income aren’t enough, you may want to speak with your creditors to discuss payment arrangements that take your unemployment into account.

Being proactive about your debts may help your case. Most utility providers, cell phone carriers, and lenders will appreciate you reaching out to them about your situation.

Although it may be daunting to send an email or pick up the phone, just think of the alternative. If you keep silent about your crisis, creditors won’t have all the facts. They won’t understand why an account that was in good standing is now delinquent, and they may penalize you accordingly.

When you’re upfront about your issues, you might be able to amend due dates, adjust interest rates, or even reduce what you owe. If you agree upon a different payment schedule that matches your needs, you may avoid late payment penalties.

The bottom line: fortify your finances

There’s no doubt a furlough places hard-working people in difficult situations. A lack of a regular paycheck will make running your household a challenge. Coming out the other side without going into the red isn’t easy, but it’s not entirely out of the realm of possibility either.

A precautionary emergency fund is your first line of defence against any financial upheaval. And each of the tips above — like scrapping unnecessary spending, boosting your income, and managing your debts — functions as another fail-safe protecting your finances.

Last but not least, a cash loan may help to make up for unexpected shortfalls that weren’t originally planned for in your original budget. Knowing you have one last line of defence may help you pay your bills on time, so get in touch with us to see if there’s something we can do to help.

A furlough of any length may put your finances to the test. Make sure you get through it with your budget intact by preparing for your unpaid time off thoroughly.

Posted in: Featured Financial Tips Personal Loans

Disclaimer: This article provides general information only and does not constitute financial, legal or other professional advice. For full details, see MoneyKey's Terms of Use.

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