FURLOUGH

By Prajanya Raj Rathore 14 Minutes Read

Historical usage of the word-

The word furlough[1] was generally used to describe a soldier on leave until 1908. The term was extensively used by several religious groups in twentieth-century when they used to return to the United Kingdom after a long period of working on the sites.

What does it mean in modern sense?

Etymologically, the word was used in the context of the missionaries who returned to the crown on leave after a long time serving to the people on their given sites. It further evolved to be used in the context of the soldiers who returned home after a long time.

Currently, due the ongoing pandemic, the word is now synonymous to a temporary lay off in which a person retains his job but he is not on the company’s payroll temporarily. This only applies to the non-essential employees working in both public and private sectors. However, he retains all the benefits like employee health insurance. This practice is usually carried out by the employees in order to retain the work force and manage the company’s finances.

Furlough can be either short-term or long term, it solely depends upon the discretion of the employer and the situation from which the company is going through. For example, some companies working in landscaping might temporarily lay-off their employees in the month of winter then again call their employees once the winter has passed by. Another recent example of furlough is the company Tesla, on 10^th of April, 2020, the company ordered a furlough for their employees because they are taking a huge hits in their delivery and sales department because of the pandemic, in order to save cost they furloughed their employees for a period of extended period of a week and since then it has been increasing the furlough.[2]

What are the reasons for a Furlough?

Conditions for a Furlough is generally because of the following reasons-

• Lack of any work
• Shortage of funds
• Insufficient personal authorization

Types of Furlough-

1. Voluntary Furlough[1]– This furlough practice was proposed by tech giants like Nokia and Dell in the year 2009 in order to save cost to the company because of the layoffs. This practice is best suited to free lance employees who have an employment out side the general employment practices. The employee will be subject to all the health benefits and other benefits which are supposed to be offered by the company.

• Involuntary Furlough[2]– when there is a strict financial constraint, the director of the company may resolve to this practice. This is a general practice which is being currently followed by many companies in order to save their cost. They will be entitled to various benefits offered by the companies. Furlough can be used to the maximum extent possible in order to reduce the necessary lay off. This measure is usually taken up by the HR in order to save a ton of cost. But there are chances that because of this involuntary furlough company can lose some of its best employees which may prove quintessential in a dire situation like this.

EVALUATING LEGAL PERSPECTIVE OF FURLOUGH IN CONTEXT OF UNITED KINGDOM AND INDIA:

Scheme pertaining to Furlough in U.K.– Amidst this Covid-19 crisis, on 20^th of March, 2020, the regime in U.K. decided to bring out the job retention scheme for the employees working in both public and private sectors. This was a great attempt at giving a supportive skeletal structure to their businesses and administration. This will help in stabilizing the increasing rate of un-employment in the country. The scheme promises to pay their employees a fair sum till June before the tax season arrive in U.K.

Particulars of the scheme in brief[3]–

1.First of all, grants under this cannot be treated as a public access fund.

2. All the employees, under this scheme are required to contact HMRC for a grant of covering 80% of the wages.

3. The scheme is applicable to all types of employers irrespective of the size of their business they are running.

The aforesaid are the main particulars of this scheme. The scheme is beneficial to the foreign as well as the domestic investors. Since it allows them to support their employees in these difficult times and this is a very noble gesture to the foreign investors as it promotes their wellbeing also because massive lay off will result in way higher cost in hiring new employees.

Criticism of the scheme-

The scheme does not give a proper definition of wages under, it does not define whether the wages are basic pay or it includes all the cost benefits associated with the job. This has not yet been answered by the crown. It might create a confusion among the people claiming the compensation under the scheme. Though it is a very enabling scheme which affects every type of worker.

Furlough practices in India[4]– Furlough in not a new practice in India, it is a general practice in the army as to when a soldier leaves on a holiday he is given half of his salary for the period of twenty days. India’s budget has allowed many tax holidays, waivers and other incentives to pull the economy out of the deep water. However, due to this pandemic, India, like any other country in the world is facing an economic slowdown. It will take time to recover from this blow, so in order to cop-up with the current scenario, there have been talks about the practice of furlough in the HR lobbies which is a very soft approach as compared to the lay-offs. It will help companies in retaining their employees thereby saving a ton of money in the process. There has been no official scheme as of now announced by the government but the practice of furlough is being seen in the airline company like Go-Air which is severely affected by the pandemic is practicing furlough.

Can the practice of furlough be successful in India?

It can be so if we look at the current scheme of the government where government has rolled out a package of Rs. 1,70,000/- crores will prove to be a boon to the underprivileged section but under the scheme there is a provision for employee provident fund under which employee can remove his savings before his retirement period. The particulars for which has been mentioned below[5]–

1. Government will contribute to the employee provident fund to both employee and the employer. Together the estimates will be around 24% and this will be extended for a period of 3 months.

2. This scheme will be for the businesses who have up to 100 employees and 90% of them have the salary less than Rs. 15000/-

3. Government is going to amend the EPF guidelines in order to enable the workers to withdraw 75% of their savings or 3 months salary in advance or which ever is lower.

Criticism of practice in India-

When the practice is combined with the aforesaid package everything falls in line. The practice can be a success if followed correctly. However, there is a dire need to codify this practice as it is going to help the people affected at all level. The aforesaid scheme is said to help around 4.8 crores employees[6]but in order for it to be a success the government should run various awareness campaign so that these schemes reach the masses and the furlough could be made a prolonged practice.

Comparative analysis vis-à-vis United Kingdom scheme-

If we look at both the schemes, they look somewhat similar but United Kingdom regime has actually codified the practice which had cleared most of the doubts pertaining to it. In India, government has left it to the public to utilize the scheme or not but the wide spread of the scheme cannot be seen. United Kingdom actually cared to elaborate the steps which needs to be taken in order to claim money from the crown under the scheme whereas in India no such directives are given other than that some scheme has been implemented for the benefit of the employees but how to claim such benefits meaning what are the steps to be followed by the workers to claim the benefits under the scheme.

Conclusion-

Furlough will be a much milder approach than a lay-off, it will help in giving the employees some of the benefits associated with the job. After a lay-off the company has to hire new employees which might not be very cost efficient and the severance packages for the employees being laid off is a whole another level of issue. This practice will be beneficial for the corporates as well as the employees. For the corporates they can easily retain their most talented workers and from the side of the workers it will invoke a feeling of loyalty towards the employer and this might benefit the company in the long run. In lay-offs, sometimes the most talented worker might get laid off but in furlough the employer has a choice to save the person.

[1] Human Resources, University of Idaho, Frequently asked questions- what is a voluntary furlough?, University of Idaho,( 3/05/2020, 5:00pm), Source Link see also Government of Guam, Employee Furlough procedure- appendix H,(3/05/2020, 6:00pm), Source Link, see also Cari Tuna & Dana Mattioli, the Politics for volunteering for a furlough, the wall street journal, (3/05/2020, 9:00pm), Source Link
[2]Government of Guam, Employee Furlough procedure- appendix H,(3/05/2020, 6:00pm), Source Link
[3] HMRC, United Kingdom, Check if you can claim for your employees’ wages through the Coronavirus Job Retention Scheme, (4/05/2020, 1:00 am), Source Link
[4] Anurag Kotky, Go-Air to Furlough 90% of their employees as the lock down extends in India, (4/05/2020, 2:00am), Source Link
[5] India Today, Nirmala Sitharaman announces a relief package of 1,70,000 crores/-, (4/05/2020, 3:00am), Source Link
[6] Supra 7

[1] Merriam Webster, meaning of the term furlough, Merriam Webster online,(2/05/2020, 3:00pm), Source Link see also for the part usage of the word before 1908 Source Link, see also john Kelly, senior research analyst for dictionary.com, what is the difference between a furlough and a layoff?, (2/05/2020, 3:30pm), Source Link
[2] Lora Kolodny, Tesla Furloughs hits half of the U.S. sales and delivery employees, CNBC online, (3/05/2020, 4:00pm), Source Link

Prajanya Raj Rathore

Just an average guy, who is here to learn and explore new things. With interest in Technology law, Media law, telecommunications law, Criminal law and Environmental law.