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August 07, 2009
Many Employers Are Using Furloughs During Recession
A new study has found that 35 percent of employers have either turned to the use of furloughs as a cost cutting option during the recession or have a furlough policy in place at their organization.

The study, conducted by Hay Group, a global management consultancy, further found that furloughs might be a better cost cutting option for employers during an economic downturn instead of layoffs or salary freezes, particularly when factoring in the impact on employee morale. Hay Group reports that respondents who had implemented furloughs reported that the impact on employee morale was 4.9 on a scale of 1-10, or “neutral.”

The study, which polled more than 100 U.S. organizations, also revealed the following about employer practices when using furloughs:

  • Almost 75 percent reported that compensation levels are being cut commensurate with time off
  • 52 percent said that incentives would be impacted by the reduced annual pay created by the furlough
  • More than 60 percent continue employees’ healthcare benefits during the furlough period. About the same percentage say their contributions to defined contribution plans are continued on reduced pay.
  • 50 percent anticipate using furloughs to cut costs for 6-12 months

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