While reductions-in-force (RIFs), layoffs, and furloughs are all difficult actions employers take out of necessity based on business performance or shifting priorities, there are differences between them (in addition to terminations based on individual performance or conduct) that are important for both employees and employers to be aware of, and you may be surprised by the distinctions.
Much confusion exists around the term “layoff,” which is often misused in place of “reduction in force.” But there is a stark difference: a layoff is intended to be a temporary elimination of a position—with an unknown duration and end date—while a RIF is known to be a permanent elimination of the position at the time of the event.
The word “intention” is important here. A furlough or layoff at the time the event occurs is intended to be temporary—with a known or unknown end date, respectively—however, either could turn into a permanent job elimination. A distinction between furloughs and layoffs is that furloughed individuals are still employees of the company; laid-off individuals are not, although when the layoffs end, they could be rehired.
In the case of a mass elimination of positions due to a plant closure or a merger/acquisition resulting in an office closure, the event would be termed a RIF. Because the location is closed, the positions would not be refilled. A company that is undergoing economic challenges and/or has less work because of temporary circumstances (such as the pandemic) might conduct layoffs with the understanding that if and when they are able to, they would invite those who were let go to return to their previous positions.
Ensuring that you have clear communications about the circumstances of the event and the effect on the employee is vital to the integrity of the organization as well as to protect against legal actions. Check with an employment attorney if you have any questions about the proper way to handle your employee reduction actions.
Below we’ve charted the key differences between each of these scenarios as well as the considerations for organizations and their employees.
The Differences Between RIF, Layoff, Furlough, and Termination
|Reduction in Force (RIF)||"Layoff"||Furlough||Termination for Cause|
|Reason||A need to permanently reduce headcount (downsize).||Work or pay unavailable for the position.||A slow period or lack of funds that is temporary.||Performance issues, insubordination, attendance issues, criminal behavior, or violation of company policies.|
|Action||Position is eliminated permanently. Those let go are no longer considered employees.||Position is eliminated with no commitment to reinstatement. Those laid off are no longer considered employees but may be rehire-eligible.||Mandatory unpaid leave of absence for an initial predetermined period of time. Those furloughed are still employees of the company.||Individual’s employment is terminated and the role may be refilled.|
|Consequences for Employees|
|Can they return to work?||No, not in their previous roles. At the time the RIF occurs (or earlier, in accordance with the WARN Act), employees are notified that their positions are being permanently eliminated.||Maybe. Employees may be eligible to apply for their previous role or for a role in another area of the organization. Depending on company policy, the individual may be considered an internal candidate for a defined period after the event.||Yes. The return date is known when the furlough is announced. However, furloughs can become RIFs if it is decided that the positions must be permanently eliminated.||No. Most individuals terminated for cause are not eligible for rehire.|
|Will they continue to receive benefits?||Possibly, for a certain period of time. Otherwise, COBRA may be offered.||Possibly, for a certain period of time. Otherwise, COBRA may be offered.||The company may continue to pay for benefits, pay a partial amount, or offer COBRA instead.||Maybe|
|Can they be offered severance?||Yes||Yes||No||Maybe|
|Can they receive unemployment benefits?||Yes, if eligible||Yes, if eligible||Possibly. The impacted individual would need to contact your state unemployment insurance office for information.||Possibly, depending on the reason for termination and the state. The employer would need to prove misconduct to bar the employee from receiving benefits.|
|Can they be offered outplacement?||Yes||Yes||No||Yes. If the employee has made a good effort but is not the right fit for the role, outplacement may be provided.|
|Consequences for Employer|
|Workforce retention difficulties||Remaining employees may need to take on additional work, resulting in burnout and low morale. In addition, they may worry about job security and seek employment elsewhere.||Remaining employees may need to take on additional work, resulting in burnout and low morale. In addition, they may worry about job security and seek employment elsewhere.||Employees may seek employment elsewhere during the furlough period, with positions needing to be refilled with new hires at the end of furlough.||If the terminated employee’s circumstances are viewed by colleagues as wrongful or unjustified, they may seek employment elsewhere as a result of perceived mismanagement.|
|Federal Worker Adjustment and Retraining Notification (WARN) Act*||The employer must provide 60-days notice and other mandatory information to affected employees in the case of a large-scale (over 100 employees) RIF.**||Large-scale layoffs expected to last over six months are also subject to the WARN Act.***||If the furloughs become RIFs, the WARN Act may apply.****||N/A|
|Brand reputation||How the company handles the event, in terms of communications and providing benefits such as outplacement to exiting employees, largely affects how remaining employees and the public receive your brand following a RIF.||How the company handles the event, in terms of communications and providing benefits such as outplacement to exiting employees, largely affects how remaining employees and the public receive your brand following a layoff.||How the company handles furloughs, in terms of communications and efforts to get employees back to work, largely affects how remaining employees and the public receive your brand during these events.||The company should follow the laws and take necessary steps before terminating an employee to reduce potential for lawsuit or damage to reputation if the termination could be seen as wrongful.|
*Regular Federal, State, and local government entities that provide public services are not covered by the WARN Act.
**Per workplacefairness.org, “For the purposes of the WARN Act a mass layoff is defined as a reduction in force that is (1) not the result of a plant closing, but (2) leads to an employment loss at the employment site[TE1] of 500 or more employees during a 30 day period, or a loss of 50-499 employees if they make up at least 33% of the employer’s active workforce.”
Click here to download a copy of this table.
Handling a RIF, Layoff, Furlough, or Termination the Right Way Makes a Difference
How an employer conducts a RIF, layoff, furlough, or termination can greatly affect how employees experience the event, how they feel about the company, and how the public perceives your brand. Preparing for such an event by having the right resources in place can help. See the links below for information, tools, and guides to help reduce potential errors and protect your brand.
Additional Resources for Information on RIFs, Layoffs, Furloughs, and Terminations
- From SHRM: What is the difference between a furlough, a layoff and a reduction in force?
- Tips for employers dealing with reorganization
Reduction in Force
- WARN Act compliance information from the U.S Department of Labor
- Why you should have a layoff and recall policy
- Furlough information from the U.S. Department of Labor
- From SHRM: Unemployment Insurance and Furlough Q&As