Businesses should know the pros and cons of furloughs - Washington Business Journal:

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As the recession has deepened, employers everywhere have lookesd for ways tocut expenses, and one of the biggest expenses is payroll. But for small and midsize businesses, cuttingt staff could make it difficult to keep thecompany running. a staff-reduction measure employed by the airline industryy when travel decreased and pilots and flightg attendants werenot needed, is becoming more commonm in other industries.
Furlough has come to mean cuttingstaffr hours, rather than its traditional meaninhg of sending employees home without pay for weeks or “A furlough is when employees are off for some periosd of time, but they are not terminateed from the payroll,” says Mitch Barnes, principaol with Mercer LLC, a human resources consulting company. The traditionak furlough option works best at companies that can make a distinction betweebn an essential employee and a nonessential one, says Jeffrey D. Cunningham, a corporate attorney at in Atlanta. “If you look at your roster and everyonesis essential, you need to look at other options,” Cunningham says.
“Look at an hour reduction, rather than a furlough.” In the Washington two large mediacompanies — National Public Radio and Co. Inc. recently instituted furloughs. In March, Gannetf announced most of its employees woulcd have to take a second week of unpaix leave this year in an effort to offset steady declines inadvertising revenue. In April, NPR said 13 employeexs were being let go and the remaining worker s would have to take five unpaid days off over the next five In addition, employees would not be paid for time off on three holidays: Memorial Day, Independence Day and Labor Day.
Hotel s and restaurants also are using furloughs to reducre theirstaff costs, says Andria Lure a partner at law firm LLP in “A hotel will close a couplr of their four restaurants and furlough those she says. “I was at a resorf hotel, and none of the restaurants were open.” Furloughs are just one optioj for companies in afinancial bind. Businessed also can cut expenses, pay, bonuses and benefits matches, put promotions on institute hiring freezes andundertake “Just about every cliengt I work with is doing something alony those lines,” Barnes “The reason we are talkingv about furloughs is they have gone down that checklist and need to cut more but are worriede about employee retention.
” For small businesses, laying off the third and fourthb employee was likely hard to do, but dismissing the fifthu and sixth employee is going be even more he says. A furlough enables a company to save moneh in hourly or monthly waged while stillmaintaining “a waiting work force” that is ready to returnn when a full workloacd returns, Barnes says. “In these unprecedentedc times, we’re seeing employers of all descriptionse usingthis approach,” he says. But it is not the firstg approach formany companies, Barnes Salary cuts, wage and hiring freezes, and other measures are usually takej first, followed by layoffs, he says.
“Many employerd believe they areso lean, and if they continue to cut they will have hard time staffiny back up,” Barnes says. “If I’m a smalkl employer or midsized employer, I can’g cut 1,000 employees. But I can reducse my costs by sendingpeople home, and as soon as the orderw start to come back in, can connectg with my furloughed employees so they will come back to work