What Is a Furlough?

A furlough is a temporary, usually unpaid leave of absence or reduction in work hours that an employer requires. During a furlough, the employee stays employed and is expected to return. In practical terms, furlough means the job still exists, but the work and the paycheck pause or shrink until the employer calls the employee back.

How a Furlough Works

Employers use furloughs to reduce labor costs during a temporary drop in work or revenue without losing the people they plan to bring back. Common triggers include seasonal slowdowns, supply chain delays, budget shortfalls, and (for government agencies) lapses in funding.

A furlough generally takes one of two forms:

• Full furlough: The employee stops working entirely and isn’t paid for that time.
• Partial furlough: The employee keeps working on a reduced schedule, such as fewer hours per week or a set number of unpaid days.

In either case, the employee stays on the employer’s payroll records and keeps their job status. No federal law caps how long a furlough can last, so the employer sets the timeline. Extended furloughs bring added obligations, covered below.

Furlough Rules Employers Should Know

Furloughed employees keep their jobs, and employers keep their legal obligations.

Key rules include:

• Nonexempt employees: Under the Fair Labor Standards Act, employers can reduce hourly employees’ hours, even to zero. Any time actually worked must still be paid, including answering emails or taking calls during the furlough.
• Exempt employees: To preserve exempt status, salaried employees generally must receive their full salary for any week in which they perform work. Because partial-week deductions usually aren’t allowed, furloughs for exempt staff are often structured in full weeks.
• Benefits: Whether health and other benefits continue depends on plan terms and eligibility rules. If reduced hours cause an employee to lose coverage, that can be a qualifying event under COBRA.
• Notice: The WARN Act can apply when a furlough meets its definition of employment loss. That definition includes a layoff lasting more than six months or a cut of more than half of an employee’s hours in each month of a six-month period.
• State rules: Some states add notice requirements or treat certain furloughs as separations that trigger final pay. Review state requirements before setting terms.

Because these rules are fact-specific, employers should consult legal counsel before announcing a furlough.

Furlough vs. Layoff

The difference between a furlough and a layoff can seem confusing, but they’re actually quite straightforward. A furlough keeps the employment relationship intact and assumes the employee will return. A layoff ends that relationship, even if the employer may rehire later.

Furloughs in Government

When federal funding lapses, agencies must stop work that isn’t explicitly authorized by law . Employees in those roles are furloughed until funding resumes, while excepted employees, such as those protecting life and property, continue working. Whether furloughed federal employees receive back pay depends on the law in effect and on action by Congress, so it shouldn’t be assumed.

How Paychex Can Help

Workforce changes rarely arrive on a convenient timeline. When a furlough is on the table, Paychex helps employers keep the details straight: making it easier for you to update employee status and hours in payroll, manage benefits eligibility and continuation, and track time so any work during a furlough is recorded and paid. That support helps protect both compliance and the trust of the team; the business plans to bring back.