The wave of furloughs that is sweeping through state governments like California, Maryland and Georgia is beginning to hit businesses and universities across the United States. White-color workers, previously exempt from furloughs, are finding the new business strategy to cut costs is to force workers to take leave without pay. It is unclear, however, whether it is possible to prevent layoffs in the long-term.
Businesses Use Furloughs to Cut Costs
Furloughs are not uncommon in certain sectors: Construction and auto assembly workers can expect to take leave without pay in between projects or during slow seasons. The latest trend in furloughs, however, is spreading to the publishing industry, technology companies and universities, according to Dana Mattioli and Sara Murray in the Wall Street Journal article, “Employers Hit Salaried Staff With Furloughs.” Companies and universities that have instituted furloughs are Spansion, Gulfstream Aerospace, Port of Seattle, Ashland Inc., Pella Corp., Winnebago Industries Inc., Media General, Gannett, John Carroll University, Utah State University, Clemson University, Arizona State University and the list is growing daily.
Employees at all levels in these companies are being affected as businesses adopt furloughs. Some businesses have asked employees to take leave without pay based on salaries and some have told all employees to take a specific number of days off, according to Mattioli and Murray. The University System of Maryland used salaries to determine how many days without pay employees should take, but Clemson University had all employees take five days off.
Employees Told to Take Leave Without Pay
The situation was the same at the Gannett Company, where all employees had to take a week off without pay. Gannett is using furloughs in an attempt to prevent layoffs, although it isn’t clear how much money will be saved or how many employees will be affected, according to the New York Times article, “Gannett to Furlough Workers for Week,” by Richard Pérez-Peña. Union members are being asked to participate voluntarily and employees were told that there would be no hardship exemptions, Pérez-Peña reported. Gannett is using the furloughs in combination with several rounds of layoffs.
New York Jets Furlough Employees
At the New York Jets’ business office, furloughs may help to prevent layoffs that have begun throughout the National Football League. Employees in marketing, media relations, finance and business operations have been told to take two weeks furlough during a four-week period in late June and early July, Mason Levinson reported in the Bloomberg article, “Jets Ask Non-Football Employees to Take Two Weeks Unpaid Leave.”
“Our business, relatively speaking, is pretty strong, and we’re taking the prudent steps cutting expenses and looking at our head count, but we thought this was the right solution for us,” Matt Higgins, the team’s executive vice president of business operations told Levinson. The furloughs will not include coaching staff or football players.
Universities Choose Furloughs over Layoffs
Faced with state budget cuts and plunging endowment values, universities are turning to furloughs to handle the financial crisis. At Utah State University, for example, all 2,995 employees were required to take March 9-13 as leave without pay, according to “USU Responds to Questions about Unpaid Furlough,” a Utah State Today Online article by John DeVilbiss.
“Without these dollars, the university would have been forced to immediately enact a significant layoff of its workforce,” DeVilbiss reported. The furloughs are part of a second wave of budget cuts and may help to avoid more layoffs. The first wave of budget cuts used ongoing university funds and included approximately 20 layoffs to make up the $6.5 million shortfall. The mandatory furlough will save $5.65 million and prevent layoffs this year.
It is uncertain, however, whether layoffs will be avoided entirely at USU as budget shortfalls in the $18 million to $30 million range are predicted for the 2010 fiscal year. “Faced with these daunting numbers, FY 2010 will require that the university consider more furloughs, layoffs and program reductions,” DeVilbiss said.
Utah State University employees are not alone. The University System of Maryland, Clemson University and Arizona State University have all implemented furloughs to deal with budget cuts. Furloughs alone will not solve the problems of John Carroll University in Cleveland, Ohio. The Associated Press has reported that John Carroll University will use a combination of furloughs and salary cuts to address the loss of roughly $47 million in the university’s endowment fund. While administrators and staff will take 10 days of unpaid leave, faculty members will be asked to sign a waiver that will permit their salaries to be lowered. Vice presidents will also face a 5 percent salary cut.
Although in the past furloughs have been limited to state government workers and certain business sectors, the use of furloughs is expanding. Faced with budget shortfalls and a dismal economic outlook, businesses hope using leave without pay will be a solution to cut costs and prevent layoffs.
Resources
DeVilbiss, John. “USU Responds to Questions about Unpaid Furlough,” Utah State Today Online, March 4, 2009.
Levinson, Mason. “Jets Ask Non-Football Employees to Take Two Weeks Unpaid Leave,” Bloomberg, Jan. 14, 2009.
Mattioli, Dana and Murray, Sara. “Employers Hit Salaried Staff With Furloughs,” Wall Street Journal, Feb. 24, 2009.
Pérez-Peña, Richard. “Gannett to Furlough Workers for Week,” New York Times, Jan. 14, 2009.
Genna Cockerham - Genna Cockerham has been writing online since November 2008. She served as Marriage Feature Writer from December 2008 to February ...
Join the Conversation