Everything you need to know about furloughs—and what they mean for workers during the coronavirus pandemic
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Monday brought more bad news for American workers, as companies continue to lay off employees to cope with the economic damage of the coronavirus outbreak and the related lockdown.
This time, Macy’s made the biggest headlines with the news that it will be furloughing the majority of its 130,000 employees. The department store giant—which also owns and operates Bloomingdale’s and Bluemercury—said that despite continuing to sell items online, it has “lost the majority of our sales” since closing all of its stores on March 18.
Macy’s is far from alone. Gap Inc. also announced that it would be furloughing most of its retail workers in the U.S. and Canada on Monday—“pausing pay but continuing to offer applicable benefits until stores are able to reopen,” the company said in a press release. And dozens of companies as diverse as Marriott, General Electric, Everlane, and The Cheesecake Factory have taken similar measures, ranging from furloughs to temporary and permanent layoffs.
With more economic hurt almost certainly in the cards, some estimates predict the number of unemployed people will reach a stunning 47 million in the weeks and months to come. Here’s what they need to know.
What is a furlough?
In short, a furlough is an unpaid leave of absence. While furloughed employees still technically retain their jobs, the furlough itself means that they cease working for their employers and do not earn a salary. The idea is that this is a temporary arrangement, and workers will one day be able to return to their jobs.
What is the difference between being furloughed and laid off?
While a furlough is meant to be a temporary arrangement, being laid off is quite the opposite: a permanent termination of one’s employment, including salary and benefits. The door is open for one’s return when furloughed; when laid off, that’s very rarely the case.
Why do companies furlough employees?
As we’re seeing now, companies can fall under temporary economic pressures that mean they have to reduce payroll for the time being. In such cases, furloughing employees can make sense—especially if the company foresees better economic conditions on the horizon that would allow it to staff up again in the near future (and bring back experienced, already trained employees from furlough to take up those jobs). David Cote, who ran Honeywell during the Great Recession, said that furloughing employees rather than laying them off enabled his company to regain ground much more quickly once the crisis had ended.
Do you get paid during a furlough?
No. As a cost-cutting measure, companies do not pay employees while they’re furloughed.
Do you keep your benefits during a furlough?
Yes, more often than not. For example, both Macy’s and Gap said that furloughed employees would be able to retain their health benefits while on leave. But it can also depend on the employer, and non-health benefits (like retirement benefits) may be trickier to maintain depending on their terms.
Can you collect unemployment benefits if you get furloughed?
As unemployment insurance is predominantly managed at the state level, this usually depends on where you live and work; some states may allow furloughed workers to collect unemployment, while others may not.
However, Congress’s recently passed coronavirus stimulus package has temporarily resolved this issue on a wider scale—extending unemployment benefits to those who may not be eligible at the state level, so long as their unemployment is connected to the coronavirus outbreak. Furloughed employees qualify, as do part-time workers, freelancers, independent contractors, and the self-employed.
Am I eligible for the federal government’s $600 weekly payment to unemployed workers if I’m furloughed?
Yes. Congress is extending that $600 weekly check to all individuals eligible for unemployment insurance—now a significantly larger number given the coronavirus stimulus package’s expansion of unemployment coverage. The $600 weekly payout lasts through July 31.
How long can a company furlough an employee?
There is no uniform answer to this question; it depends entirely on the company, the rules and regulations in its local jurisdiction, and other factors (such as the terms of collective bargaining agreements for unionized employees). However, in general, furloughs are supposed to be viewed as temporary, short-term arrangements; otherwise, it would make more sense for companies to simply lay off employees, and for employees to move on and find new permanent employment.
More must-read personal finance coverage from Fortune:
—Everything you need to know about the coronavirus stimulus checks
—5 things to know about unemployment benefits in the COVID-19 stimulus package
—Close to retirement and panicking? How to avoid locking in losses
—How to defer your student loan payments during the pandemic
—What to do if you’re worried about getting laid off
—Listen to Leadership Next, a Fortune podcast examining the evolving role of CEOs
—WATCH: The U.S. tax deadline was pushed from April 15 to July 15
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