More companies turn to furloughs to save money, jobs

Yet, the motivation behind furloughs is not entirely altruistic, says Gebauer. Employers who have temporary hiatuses rather than layoffs save on severance costs, as well as future rehiring and retraining expenses when an economic turnaround eventually comes.

Many of those employers will dramatically reduce payroll expenses with the furloughs. For instance, furloughs and salary reductions for Maryland state employees are scheduled to save the state more than $34 million during the 2009 fiscal year.

Some companies have furloughs because layoffs just aren't an option.

Winnebago has already had "significant layoffs," says spokeswoman Sheila Davis. "When you reach a certain point in your employee base, it is important to preserve your corporate structure so that when the market returns — which we know it will — we will have the employees and resources to respond."

Furloughs are not simple to implement, says Doug Christensen, a partner in Dorsey & Whitney's Labor and Employment law practice group in Minneapolis.

There're a bevy of complex legal issues that companies must navigate, he says, such as:

•Firms need to check for any pre-existing employment agreements that will allow workers to claim that they were "legally promised" certain pay per week, month or year.

•Firms with so-called exempt, or salaried, employees must be careful in how they structure the leaves to make sure that the furlough is not done in a way that converts those exempt workers into non-exempt employees who could try to claim overtime pay.

•If an exempt employee performs any work at all during a week-long furlough — such as answering an e-mail that comes through a work BlackBerry — he or she is owed the entire week's salary.

Sinking morale

In addition to legalities, employers also have to worry about staffing levels and about how workers will react.

"Morale is in the gutter" in Atlanta, where firefighters have been forced to take furloughs that reduce their work hours and pay by 10%, says Jim Daws, president of Local 134 of the International Association of Fire Fighters.

Response teams are understaffed, he says, making for a "greatly increased" risk for citizens — and firefighters — to get hurt. Many of those firefighters are also exhausted because they're working second and third jobs for extra cash, he says. "It's a terrible situation."

Pella created a communications plan and brought in state unemployment staff to answer benefits questions. But even with those steps, "There's going to be some level of morale deterioration whenever you have conditions like these, because there is fear," says Peterson.

Clemson University in South Carolina, which began five-day leaves on Dec. 1, took an unusual approach to ease some of the strain. It set up a "Furlough Relief Fund" to support those "who face the most severe financial hardship" during their leaves.

More than 300 donations totaling $71,363 came from faculty, staff, students and trustees. Individual amounts ranged from $2 to $5,000. Fund managers looked at factors such as salary level, total household income and family size before distributing money to 158 employees.

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