Furloughs, Layoffs and RIFs — What’s the Best Option for Your Institution’s Workforce?
The fall semester remains a big question mark in the minds of those associated with higher ed institutions. However, one thing is clear — enrollment will take a dip. That being said, tough employment decisions must be made, and HR must be prepared to explain and recommend a combination of furloughs, layoffs and salary freezes and reductions to decision makers. Ira Shepard, CUPA-HR’s general counsel, and Carolyn Pellegrini, counsel at Saul Ewing Arnstein & Lehr, gave a rundown of each option in a recent CUPA-HR webinar.
Furlough is a short-term, temporary unpaid leave of absence. Advantages to furloughing employees are that institutions can still retain employees, furloughed employees will be able to apply for unemployment benefits, furloughed employees can remain on health benefits, and the immediate relief of cash output. Institutions should confirm with insurance carriers if benefits coverage continues during furlough and who’s paying the employee portion of the premium. Additionally, institutions should communicate to employees the duration of the furlough and deductions from pay and should have written rationale for dealing with employees differently. They should also be aware of exempt status and should not make representations regarding unemployment.
Salary freeze refers to when an institution suspends salary or wage increases for a period of time. Everyone remains employed and continues to work their regular schedule (remotely if needed). One advantage of a salary freeze is that institutions won’t have cost-of-living increases (saving money in the long term). A salary freeze can be lifted at any time or kept in place as long as the institution sees fit. During a salary freeze, salary changes upon promotion, bonuses (unless specifically stated), adjustments that have already been awarded and unionized employees are not affected.
Salary reduction refers to when an institution reduces employee salaries and wages for a period of time. Advantages include immediately reducing cash output, maintaining personnel, and the ease with which a salary reduction can be reversed. A salary reduction will affect at-will staff and staff with contracts. For staff with contracts, institutions must know what the contract says and if there’s any language that gives the institution a reason to reduce an employee’s salary. Salary reductions also affect faculty, however these reductions can be difficult because of various rules and regulations surrounding faculty status. Institutions need to be mindful of exempt employees and aware of state laws regarding the notice period and union collective bargaining agreements which may not permit reductions without bargaining.
Reduction in force (RIF) is a long-term layoff and break in employment, although there may be a general or specific intent to reinstate. An advantage of a reduction in force is the immediate cash flow relief from salary and benefits. Reductions in force will affect at-will employees, employees under contract, unionized employees and faculty. There are two types of reductions in force — voluntary and involuntary. Voluntary RIF offers special benefits to those who leave. With involuntary RIF, the most important consideration is that all employees are treated equally (there is no discrimination or retaliation). When determining who to lay off, institutions should consider employee performance, special skills, productivity and job or department redundancy (multiple people who can do the same job).
Whatever option your institution chooses, remember to review applicable documents, identify specific goals, create stakeholder committees and communications strategies, train decision makers and review final decisions. Most importantly, proceed carefully and with compassion.
For more practical tips about furloughs, salary freezes, salary reductions and reductions in force, watch the archived webinar.