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7 tips to get through a coronavirus furlough

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Matthew Goldberg

It doesn’t matter the industry or the occupation, a furlough can happen to just about anyone.

That’s why it’s important for those dealing with the financial difficulties of a recent coronavirus-driven furlough to know there are a number of ways to try and stay afloat when you’re not receiving your normal pay.

Even if you’re lucky enough to still have your job today, it may be in your best interest to take some proactive steps to plan ahead in the event a furlough, or lay off, impacts you in the near future. Facing the economic uncertainties of a pandemic, it’s entirely possible that you could potentially be the victim of an employment interruption at some point.

Here are seven tips for surviving a furlough in these tough times.

1. See if you’re eligible for unemployment insurance

Take advantage of benefits available through the CARES Act or unemployment insurance benefits. The U.S. Department of Labor has answers to some of your eligibility questions.

Pandemic Unemployment Assistance (PUA) may be an option for those who wouldn’t normally qualify for regular unemployment compensation.

“The Federal supplement to the state unemployment benefits now makes a big difference,” says Mark Meredith, certified financial planner at Meredith Wealth Planning in Maryville, Illinois.

States give an additional $600 weekly payment to eligible individuals receiving other benefits under Federal Pandemic Unemployment Compensation (FPUC).

2. Your bank or lender may provide short-term savings options

Many banks are waiving certain fees or allowing borrowers to defer making payments.

For homeowners, a monthly mortgage payment is usually one of the highest expenses. A mortgage forbearance takes a big expense, temporarily, off of a person’s plate if they’re eligible.

“This could be a good way that you could potentially reduce your monthly outflow towards living costs,” says Amar Shah, CFA, certified financial planner and founder of Client First Capital in San Diego.

Those with federal student loans can take advantage of the CARES Act, which automatically stops student loan payments until Sept. 30. During this time interest is being temporarily set at 0 percent.

Unfortunately, private student loans aren’t covered under the CARES Act.

Bankrate is tracking how many of the largest banks are helping their customers. See if there’s a way that your bank can help you during this emergency.

3. Set a furlough budget

Cut back on spending now to either survive your furlough or prepare for one. Budgeting is the best way to see where your money is being spent.

“Take a close look at your monthly budget,” says Greg McBride, CFA, Bankrate chief financial analyst. “Identify which items you could cut back or eliminate right now. And identify those items you could cut back or eliminate if conditions get even worse.”

Making meals at home, instead of getting delivery or takeout can save you money. Also, you may be able to cut costs by analyzing your subscription services, gym memberships and other expenses that are on autopilot.

Also, reevaluate your fixed expenses. It’s not uncommon to switch auto insurance and homeowners insurance providers and save $500-$1,000 a year, Meredith says. Your cell phone bill might be another area of opportunity.

“I think people, when they’re so ingrained in their work lives they rarely have the time or desire to look into it very deeply,” Meredith says.

4. Balance transfer credit cards can buy time

This emergency can be a little easier to handle if you have more time. More time can help you save, cut your budget and hopefully find a steady income. There are a few lending tools that can do this.

Consider using a balance transfer credit card, a 0 percent introductory offer or a balance transfer offer on an existing credit card.

One caveat is that part of a new credit card application will likely be based on your income. So those who still are employed may be in a better position to take advantage of a low or no-interest period. Some banks may charge an upfront fee of 3 to 5 percent to take part in these offers. If you don’t have the best credit, a personal loan is another option for getting the funds you need.

Be aware of what you’re charging on this credit card and have a plan for how to pay it back — preferably before the favorable interest period ends.

“Limit it to essential spending only,” McBride says.

Keep in mind, losing your paycheck is an emergency.

“So, somebody who’s already been laid off, this is a time when it’s OK to make the minimum payment on your credit card,” McBride says.

5. Try to avoid touching your retirement savings

You may qualify to take a penalty-free withdrawal from an eligible retirement plan, such as a 401(k). But these withdrawals should only be an absolute last resort. Some coronavirus-related withdrawals won’t have a 10 percent early withdrawal penalty if they’re made in 2020. But keep in mind that you’ll still have to pay taxes on these withdrawals, though you may be able to spread these payments out. Also, you could use a Roth IRA as an emergency option if other options aren’t available. Contributions from a Roth IRA can be withdrawn at any time.

A $10,000 withdrawal from your retirement account today could be $57,000 in lost retirement savings 30 years from now, McBride says. That’s based on a six percent annual rate of return.

Annual contribution limits and the fact that you might never replenish these retirement funds are also reasons to avoid this route if possible. A per

6. Find saving opportunities

Try to keep adding to your emergency fund, if you have one, and are still working.

“Do that with any stimulus check you may be receiving, your tax refund and with the discretionary spending you’re not doing,” McBride says. “It’s the money that’s not being spent in restaurants, at movie theaters or ball games — is money that you can be putting into savings to pad your cushion.”

Look for other ways to try and replace income, if necessary. It’s OK to dip into your emergency savings if you’re furloughed right now, since this is an emergency.

Even if you entered this furlough without an emergency fund, hopefully spending cuts can help you create one on the fly. Consider keeping these funds separate from your normal checking account. Keeping it separate can prevent it being spent and may help you earn more interest. (Compare savings accounts on Bankrate to find the right one for you.)

7. Achieve a goal during furlough

You’d rather be receiving paid time off or be working. But you can’t control being furloughed, so it makes sense to use this time wisely. This could be a good time to complete a project around the house or achieve a career or personal goal. These items could help you improve the value of your house or improve yourself for a future job. You might be able to find an interesting (and possibly free) webinar, virtual learning experience or online group related to your professional development. Also, look into finding organizations or societies related to your career, if applicable. The organization, or some of its members, might be going through the same situation and could offer helpful advice.

Perhaps it’s also a good time to update your resume in case the furlough turns into a layoff down the road. It might also be a good time to reconnect with old colleagues, your professional network or your alma mater. Catching up virtually or on the phone seems more commonplace with at least parts of the U.S. on pause and under stay-at-home orders.

“Now [that] you have this extra time,” Shah says. “Make sure you’re capitalizing on it.”

Prepare for future furloughs or a permanent job loss

Spending every cent wisely has never been more important. Keep your spending to the essentials as much as possible.

“None of us knows exactly what the road ahead entails,” McBride says.

Those that are still employed or are only furloughed with reduced hours or pay should use budgeting to save even more.

This article was published at Bank Rate on April 23, 2020. Reprinted with permission. 

About the Author: Matthew Goldberg is a consumer banking reporter at Bankrate. He graduated from Illinois State University with a bachelor’s degree in mass communication and earned an MBA at William Paterson University.

He began his writing career in 1998 at Sun Publications in Crystal Lake, Illinois. He was sports editor at The Daily Vidette, a sports reporter at The Journal Standard and a sports writer at The Quincy Herald-Whig. His work has also appeared in Sports Illustrated On Campus. He has been honored by both the Illinois Associated Press Editors Association and the Illinois Press Association.

He also has more than seven years of financial services experience, in both banking and insurance.


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With Shutdown Over, OPM provides Guidance on Back Pay for Federal Employees

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In late January, federal employees across the country returned to work for the first time in over a month.  In an effort to provide retroactive pay as quickly as possible, The U.S. Office of Personnel Management (OPM) has issued guidance to federal agencies impacted by the shutdown to explain how their employees should receive back pay and other benefits.

Back Pay

Employees who were furloughed will receive back pay at their standard rate of pay for the time that they would have been in a regular pay status if the shutdown had never occurred. This includes overtime pay, night pay or other premium pay (e.g. LEAP, holiday pay, etc.) that the employee would have received.

However, if an employee was scheduled to be in a non-pay status during the shutdown, including Leave Without Pay (LWOP) or serving a suspension, then the employee is not eligible for backpay during that period, including holidays.

For excepted employees who were required to work without pay during the shutdown, they will receive their regular pay for the hours they actually worked, including any overtime or other premium pay. Conversely, if the employee did not show up for work and did not request leave, they will be marked absent without leave (AWOL) and will not receive back pay.

For any employees who received unemployment payments during the shutdown, the state involved will receive notice of the back-pay amount and then make a determination as to what repayment is required.

Leave

Furloughed employees cannot be charged paid leave or other paid time off during the shutdown, even if they had prescheduled paid leave. On the other hand, excepted employees may be charged leave – and compensated for it through back pay – for periods during the furlough where they used paid leave in lieu of reporting to work.

Many employees were planning to take “use or lose” annual leave but were furloughed before they could do so. According to OPM, agencies must restore any annual leave that was scheduled in writing prior to November 24, 2018. Note that restoration of leave will not apply to scheduled leave for December 24, which was declared a federal holiday in 2018, unless the employee can show they would have rescheduled the leave for another day. Restoration also does not apply to leave that had previously been restored. In those instances, the leave is lost for good.

Similarly, employees who were unable to use compensatory time off in lieu of overtime pay due to the shutdown will be paid for such time. Compensatory time off for travel that was forfeited can be restored and extended for another 26 pay periods.

In regard to accruing leave during the shutdown, all employees receiving back pay are considered in a pay status for that period and will also accrue leave at normal rates.

FMLA

The Family Medical Leave Act (FMLA) provides unpaid leave for up to 12 weeks but employees are permitted to substitute paid leave during this time to continue receiving pay.  For employees that were on FMLA during the shutdown, back pay will be dependent on whether the employee was scheduled to substitute paid leave. If the employee had planned to use paid leave during their FMLA leave period, these employees will not only receive back pay but they will also not be charged any leave. However, employees scheduled to be in a non-pay status (i.e. FMLA LWOP), will not receive back pay. For all employees using FMLA leave, the shutdown period will still count toward their 12 weeks of protected leave.

Benefits & Retirement

Employees are also entitled to retroactive benefits. Deductions will be taken out of the back-pay checks to cover employee contributions to health and retirement plans. Loan payments to Thrift Savings Plans (TSP) will also be made.

For those employees who requested to retire during the shutdown, the retirement will be made effective retroactively to the date requested and no back pay will be received after that date.

It isn’t yet clear when agencies will begin making these retroactive payments. If you believe the agency has incorrectly calculated your back pay or you have been improperly denied any benefits as a result of the shutdown, you should contact an experienced federal employment attorney to determine what options you have to protect your rights.

About the Author: Alan Lescht has been successfully litigating employment discrimination, civil rights, and commercial litigation cases for more than 30 years and has won dozens of notable trials. He is the founding partner of Alan Lescht and Associates, PC, where he oversees the firm’s employment litigation and counseling practices.


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Gov. Schwarzenegger’s Furlough Days for Thousands of State Workers Ruled ‘Illegal’

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Image: Kate ThomasCA Governor Arnold Schwarzenegger acted illegally by placing tens of thousands of state employees on unpaid furloughs, a Superior Court judge ruled late Thursday on SEIU Local 1000’s lawsuit to overturn the furlough scheme. The ruling to halt thrice-monthly furloughs marks a much-improved start to 2010 for the state workers, who had seen their salaries slashed roughly 15 percent as a result of the mandated unpaid days off.

Alameda Superior Court Judge Frank Roesch ruled that by ignoring legal restrictions on furloughs, the Schwarzenegger administration overstepped its authority in approving the unpaid days off. Judge Roesch called the furloughs an “abuse of discretion” that interfered with operations of state agencies (like the DMV) and achieved questionable savings. From Roesch’s case ruling:

Moreover, when furloughs are implemented to save money, yet their implementation in some agencies saves nothing and increases costs, such a policy is arbitrary, capricious and unlawful.

“We said all along that the governor’s actions were illegal,” said SEIU Local 1000 President Yvonne Walker. “The governor violated the law and, as a result, people lost money…to remedy that violation, you have to give people back the money they lost.” SEIU Local 1000 first filed suit after the governor began the furloughs in February, in response to the state’s $42 billion budget gap.

Judge Roesch’s ruling could affect up to 50,000 employees represented by SEIU who work at agencies that do not rely on the state’s general fund, as well as tens of thousands of workers represented by two other unions, CASE and UAPD.

More details from SEIU Local 1000 on Judge Roesch’s ruling to halt furloughs after the break.

Judge Frank Roesch’s December 31st ruling is the second consecutive legal victory for Local 1000 on the furlough issue. In November, another Superior Court judge ruled that the governor violated the state insurance code when he included State Fund employees in his unilateral furlough orders.

An administration spokesperson said the governor would appeal and that an automatic suspension of Roesch’s order will result–leaving furloughs in effect and halting consideration of back pay–while an appellate panel considers the case. At a minimum, Judge Roesch’s ruling orders Governor Schwarzenegger to “cease and desist” the furlough of employees whose salaries are paid from special funds. Additional litigation may be necessary to clarify whether Judge Roesch’s order extends to state employees whose salaries are paid from the General Fund. “It remains to be seen whether the governor will continue to waste scarce state resources litigating this issue rather than simply complying with the Court’s order,” said Local 1000 president Yvonne Walker.

SEIU Local 1000 attorneys said they will ask Roesch to put the ruling into immediate effect and stop the furloughs during the appeal. In the State Fund case, Roesch ordered an immediate end to furloughs and reinstatement of back pay. The judge ruled that the governor’s reliance on the state Emergency Services Act, to furlough state workers, was misplaced because an emergency must have some time limit. “The emergency necessitating them was the failure of the Legislature to pass the budgets, though the reach of the orders extended long after those budgets were subsequently passed and signed into law,” the judge wrote.

Roesch ruled that furloughing state employees who are paid from special funds illegally interferes with the operation of specially funded agencies. “When furloughs are implemented to save money, yet their implementation in some agencies saves nothing and increases costs, such a policy is arbitrary, capricious and unlawful,” he said.

Roesch also rejected what he described as Schwarzenegger’s final justification: the need to treat all employees equally, regardless of the source of their agency’s funds. The governor is arguing, in effect, that furloughs should be spread throughout state government “so that all state employees suffer equally, without regard to savings to the General Fund and without lessening the pay cuts suffered by the General Fund employees,” Roesch said. “This is not rationally related to any government purpose.”

» View the Order Granting Petition For Writ of Mandate [PDF]

Read the original news update from SEIU Local 1000 here.

*This post originally appeared in SEIU Blog on January 4, 2009. Reprinted with permission from the author.

About the Author: Kate Thomas is a blogger, web producer and new media coordinator at the Service Employees International Union (SEIU), a labor union with 2.1 million members in the healthcare, public and property service sectors. Kate’s passions include the progressive movement, the many wonders of the Internet and her job working for an organization that is helping to improve the lives of workers and fight for meaningful health care and labor law reform. Prior to working at SEIU, Katie worked for the American Medical Student Association (AMSA) as a communications/public relations coordinator and editor of AMSA’s newsletter appearing in The New Physician magazine.


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