Furloughs are not something new to the workforce. Typically we see furloughs implemented when there are forecasted slowdown periods in standard business operations. The term sounds much nicer than “temporary layoff,” which is what it really is. The difference is that for company employees who receive benefits, those tenured benefits are not suspended, as they would be with a permanent layoff. Ultimately, the furlough is seen as an important cost-savings tactic.
While furloughs are not new, they are in terms of the contingent workforce. Companies are now asking contingent workforce engagement managers to consider furloughing contingent workers (CW) even if the company itself does not mandate one. They see it as an opportunity to save money as well as to avoid some risk. So how do you manage a furlough when it comes to the contingent workforce?
All too often, especially at year-end, a large number of employees take time off. If most of the employees will be gone, should the contingent workers be there? It may not be for supervision concerns but what if there were an emergency, an accident, etc.?
Although leadership may think because they engage contingent labor to help with the ebbs and flows of their work demands and provide scalability, furloughing actions when it comes to CW program management should not be an issue. Since they are not employees, shouldn’t you just be able to tell the staffing suppliers we won’t need these CW services during that downtime period.
But it’s not that easy. Contingent workforce program managers who have dealt with furlough programs will tell you it is not easy to manage. Depending on how the process is handled, it can have a lasting negative impact on your brand and your program.
First, you must realize that although it is called a furlough; it really is a temporary layoff and any type of layoff is going to prompt concern and a negative reaction if not communicated and planned properly. Having extra time off may seem positive but what if the contingent worker cannot afford to have the time off? They may look for a new opportunity and you now lose their trained, skilled, expert talent — which may cost more in the end, especially after being forced to onboard, train and assimilate replacement CW talent.
A successful furlough program requires time, effort, education and good staffing suppliers and partners. Some experienced program managers say their furlough initiatives are actually looked at as a benefit by their contingents.
When considering implementing a furlough within your contingent workforce program be sure to consider the following:
- If it is your first time implementing a furlough, be sure to have a competent and complete change management plan in place for both internal employees and externally for your staffing suppliers and their CW employees.
- Make sure your internal teams take the furlough time into consideration when determining due dates and project deadlines. This can help avoid unplanned extended project times, delays or worse overtime costs to get the work done in the original time allotted.
- Make sure your staffing suppliers and partners are aware of the furlough dates, expectations and that they inform any contingent worker at your organization of the process and timing of the furloughs.
- Realize your staffing suppliers and partners will very well still incur costs for their employees even though they will not have billable hours they may ask your company to cover, such as unemployment taxes and possibly healthcare costs.
- Know your state and federal regulations when it comes to a furlough activity. Depending on the number of individuals affected, there may be statutory requirements that must be met at the state or federal level to keep your organization compliant.
Whether a company really saves money OR finds because the work still needs to get done, once the furlough is over the contingent workers have to work over time or for more days than originally thought, negating those savings.
By incorporating the furlough time off into their project plans and scope, and partnering with their staffing suppliers and partners, successful programs report they do recognize cost savings. Some say they are so cost effective they are considering adding additional furlough action periods to support additional known business operation slowdowns.