Furlough Explained: Definition, Employee Rights & How It Works

Furlough is a temporary, involuntary leave of absence from work during which employees are not paid but typically retain their employment status and benefits. The term has two distinct meanings depending on your country. In the United States, furlough commonly refers to unpaid time off imposed on government employees or private-sector workers during budget shortfalls or emergencies. In the United Kingdom, furlough became a mass employment programme during COVID-19 through the Coronavirus Job Retention Scheme, where the government paid a percentage of employees’ wages while they were unable to work.

Regardless of which system you are dealing with, furlough is fundamentally different from termination. You remain an employee. Your job is expected to resume. And depending on the jurisdiction, you may be entitled to certain protections during the furlough period.

Key Takeaways

• Furlough is a temporary leave of absence where employment continues but pay is reduced or suspended.
• In the US, furloughs are common in government agencies and during economic downturns; they are unpaid unless the employer or government provides partial pay.
• In the UK, the Coronavirus Job Retention Scheme paid up to 80% of wages; the scheme has now closed but the concept remains relevant.
• Furloughed employees typically retain health insurance, pension contributions, and other benefits.
• Furlough is not the same as a layoff — your job is expected to continue after the furlough period ends.

What Is Furlough?

Furlough is a temporary suspension from work that preserves the employment relationship while reducing or eliminating pay. Unlike a layoff or termination, a furlough is designed to be reversible — the employer expects to bring the employee back to their role once business conditions improve.

Furloughs can be:

• Partial. You work reduced hours and receive reduced pay (for example, three days a week instead of five).
• Full. You do not work at all and receive no pay for a defined period.
• Rotating. Teams alternate who is furloughed each week or month to distribute the financial burden.

The key legal distinction is that furlough does not sever the employment relationship. You remain on the payroll. Your benefits — including health insurance, retirement plans, and accrued leave — generally continue, though the specifics depend on your employer’s policy and applicable law (U.S. Office of Personnel Management, Furlough Guidance).

Furlough in the United States

In the US, furloughs are most commonly associated with federal and state government agencies facing budget constraints. When Congress fails to pass a spending bill, for example, federal employees may be placed on furlough — also called a “shutdown furlough” — until funding is restored.

Government Furloughs

Federal employees furloughed during a government shutdown are entitled to retroactive pay once Congress passes a funding bill, under the Government Employee Fair Treatment Act of 2019 (5 U.S.C. § 5550a). However, the pay is not immediate — employees may wait weeks or months for back pay, creating real financial hardship. During the 2018–2019 shutdown, approximately 800,000 federal employees were affected, with some working without pay and others sent home entirely (Congressional Research Service, 2019).

Private-Sector Furloughs

In the private sector, furloughs are a cost-cutting tool used to avoid permanent layoffs. During the 2008–2009 recession and again during COVID-19, many companies furloughed employees for one to five days per month. Private-sector furloughs are governed by employment contracts and company policy — there is no federal mandate requiring employers to pay furloughed private-sector workers, though some states have rules about notice requirements.

WARN Act Considerations

The Worker Adjustment and Retraining Notification (WARN) Act requires employers with 100 or more employees to provide 60 days’ advance notice of a mass layoff or plant closing (29 U.S.C. § 2101). Furloughs lasting fewer than six months may not trigger WARN Act obligations, but employers should assess whether a series of short furloughs effectively constitutes a layoff.

Furlough in the United Kingdom

The UK term “furlough” entered mainstream vocabulary during the COVID-19 pandemic through the Coronavirus Job Retention Scheme (CJRS). Under the CJRS, the UK government paid up to 80% of a furloughed employee’s wages (capped at £2,500 per month) while the employee was unable to work due to the pandemic (HMRC, Coronavirus Job Retention Scheme).

How the UK Scheme Worked

• Employer eligibility: Any UK employer could apply, regardless of size or sector.
• Employee eligibility: Any employee on the payroll as of a specified cut-off date could be furloughed.
• Duration: The scheme ran from March 2020 to September 2021, with the subsidy percentage gradually reduced.
• Benefits: Employees on furlough continued to accrue holiday and pension contributions. Employers could choose to top up the remaining 20%.

The CJRS has now closed, but the concept of furlough remains in UK employment law as a contractual arrangement. Employers can still furlough employees by mutual agreement, though government wage subsidies are no longer available. If an employment contract contains a furlough clause, the employer may be able to invoke it without the employee’s consent.

Furlough vs Layoff

The distinction between furlough and layoff matters significantly for employees and employers. Here is a side-by-side comparison:

Feature	Furlough	Layoff
Employment status	Continues	Terminated
Duration	Temporary	Typically permanent
Pay	Reduced or zero	No pay (unless severance applies)
Benefits	Usually continue	End at termination
Expectation of return	Yes	No guarantee
Eligibility for unemployment	Varies by state (often yes)	Yes, typically
WARN Act	May not apply	Applies if criteria met
Health insurance	Usually maintained (COBRA or employer-paid)	COBRA option available

During the COVID-19 pandemic, the distinction blurred in practice. Many employers who intended furloughs to be temporary ended up making permanent layoffs once it became clear business would not recover. The US Bureau of Labor Statistics reported that temporary layoffs accounted for a significant share of unemployment in 2020, with many never converting back to permanent positions (BLS, Employment Situation, 2020).

Employee Rights During Furlough

Your rights during a furlough depend on your jurisdiction and whether the furlough is in the public or private sector.

In the US:

• You may be eligible for unemployment benefits during a furlough, depending on state law. Many states expanded eligibility during COVID-19.
• Your employer must continue health insurance if they were providing it, though the employer may ask you to pay your share of premiums.
• Your employer cannot use a furlough as a pretext to discriminate. Furloughing employees based on race, gender, age, or disability violates Title VII, the ADEA, and the ADA.

In the UK:

• Furloughed employees retain employment rights, including the right not to be unfairly dismissed after two years of service.
• Holiday accrues during furlough. Employees can be required to take holiday during furlough, though the employer must give notice (GOV.UK, Holiday Pay During Furlough).
• Employees on furlough can undertake volunteer work or training, provided it does not provide services to or generate revenue for the employer.

Frequently Asked Questions

Can I be fired while on furlough?

In most cases, no — furlough is meant to preserve your job. However, if business conditions deteriorate further, your employer may convert the furlough into a permanent layoff. If you have been furloughed for an extended period, consult your employment contract and local employment law for protections against unfair dismissal.

Does furlough affect my pension?

During furlough, your employer is generally required to continue pension contributions at the same rate. In the UK, auto-enrolment pension contributions must continue during furlough. In the US, employer 401(k) matching contributions may pause if the employer modifies the plan during the furlough.

Can I work another job while on furlough?

In the US, there is typically no legal restriction on furloughed employees seeking other work. In the UK, furloughed employees may undertake volunteer work but must not provide services to their employer or a connected employer. Check your furlough agreement for specific terms.

How long does a furlough last?

Furloughs have no standard duration. During COVID-19, government furlough programmes lasted months or years. Private-sector furloughs typically range from one to twelve months. If your employer does not specify an end date, you may be entitled to seek clarity under employment law.

Is furlough paid or unpaid?

Furlough can be either. Government programmes during COVID-19 provided partial wage subsidies. Private-sector furloughs are often unpaid, though some employers voluntarily continue partial pay. There is no universal legal requirement for furlough pay in the US private sector.

This article is general information, not legal advice. Consult a qualified employment lawyer for guidance on your specific jurisdiction and circumstances.