A layoff is when an employer either temporarily or permanently dismisses an employee, usually as a result of an organizational restructuring, downsizing (reduction in force), or economic pressures that impact the industry.

According to the Worker Adjustment and Retraining Notification Act (WARN), a mass layoff occurs when a place of business does not shut down but lays off at least 50 of its employees when they constitute at least 33% of the workforce, or at least 500 employees within a 30-day period. These numbers only include full time employees (exclude part-time employees). 

According to the Department of Labor, covered employers must “provide at least 60 calendar days advance written notice of a plant closing and mass layoff affecting 50 or more employees at a single site of employment.”

There are a few key differences between a furlough and a layoff: 

1. Furloughed employees relieved of their duties with the expectation that the move is only temporary and that they’ll eventually return to work. Depending on the situation, an employer may even provide furloughed employees a specific return date to help them better plan to return to work. 
2. Furloughed employees typically retain their benefits while employees who are laid off typically do not. 
3. Furloughed public employees retain their employment rights—meaning that when a position is reinstated, they have a right to return to that role if they want and if it still exists. 
4. Furloughs are relatively seamless while layoffs require more significant costs and compliance measures. 

An employer will typically use a furlough to retain staff that they can’t afford but don’t want to layoff.

Severance pay is a sum or benefits granted to an employee when they leave a company, sometimes in addition to a person’s final paycheck. In some cases, severance is given to laid-off employees to help them navigate unemployment, while in other cases this pay is offered because employers need to honor an employment agreement.

In most cases, severance pay is not required by law. However, there are a few circumstances when severance pay may be legally binding, including:

• If severance is mandated by state laws
• If an employer has committed to offering severance in an employment contract or other employment materials

Related Terms: Furlough, COBRA