More companies turn to furloughs to save money, jobs

Adam Jadhav will film a humorous video that he'll post on Shelley Cox will finish the classroom observation hours needed for her elementary education license. Rebecca Evans will refurbish her bathroom before taking a boat trip off the coast of North Carolina. The activities vary, but each of these folks has the same reason for their free time: Employers forced them to take a short, unpaid leave.

To curtail costs while avoiding the strain of layoffs, companies, colleges and state governments are mandating temporary hiatuses, commonly known as furloughs. RV-maker Winnebago Industries, the state of California, the University of Arizona and USA TODAY parent Gannett are among dozens that have used this tactic to save millions in payroll and other expenses.

"Furloughs are really coming under much greater consideration by employers," says Julie Gebauer, managing director at human resources consulting firm Towers Perrin.

Historically, industries such as heavy manufacturing, retail and airlines have furloughed employees when demand for their products or services slowed. But a growing number of other sectors have put this option on the table when analyzing ways to slash expenses, she says.

And more are expected to.

Window- and door-maker Pella recently reviewed a range of cost-cutting options, including layoffs, and went with four-day workweeks and one-week furloughs for a portion of its hourly employees.

It was a hard decision, says human resources Vice President Karin Peterson, but layoffs would have had "a significant impact" on morale and the company culture. With the unpaid leave, Pella saves money, and employees keep their jobs and benefits.

"We're making decisions that impact (workers) and families," she says. "The options that we're taking aren't the lowest-cost, but they're a balance between the needs of our business and the needs of our people."

Employees given one-week furloughs are eligible to apply for unemployment compensation in some states.

"People aren't getting the hours, and they're not getting the compensation, and unemployment is only a portion of what one can earn," Peterson says.

Paychecks may be pared, but most folks on leave still have to cover monthly expenses such as food, utilities and child care. Those who want to do something ambitious with the free time — such as tackling nagging do-it-yourself home repairs — still have to pony up for supplies.

"As a single mom, this is gonna hurt quite a bit," says Evans, who works in marketing.

She also echoes the sentiments of many when she says, "But I'm just happy to have a job."

Better than layoffs

It's a tough break, but furloughed employees could have it much worse, says Marion Crain, an employment and labor law professor at Washington University in St. Louis.

Employees are often "upset and angry" when they first hear about the unpaid leaves, she says. But they're better off than many who'll be handed pink slips or forced to take less pay for the same amount of work.

More than 3.6 million people have lost jobs since the recession began in December 2007. And 7% of the 245 U.S. companies surveyed by employee benefits consultancy Watson Wyatt Worldwide have sliced worker salaries.

Furloughs are "actually a job-saving action by the employer," says Crain.

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