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What is a Company Layoff?

Malcolm Tatum
Updated: May 17, 2024

During periods in which a company experiences a drop in sales or revenue generation, it is not unusual for company layoffs to occur. Essentially, a company layoff is a temporary period in which employees that occupy specific positions within the corporate structure are not required to report to work. The layoff occurs due to a lack of demand for the labors normally exerted by the employees in the production of the goods or services offered by the business. While a layoff can range from a period of a week to an indefinite amount of time, the company layoff is not the same as termination. Companies choose to implement layoffs because there is a reasonable expectation of needing to reactivate the laid off employees at a future date.

Generally, a company layoff will involve the cessation of employee benefits, such as salary or wages. Depending on the structure of the corporation, and the exact terms of the benefit packages, the company layoff may or may not impact the extension of group health insurance coverage. In addition, employees generally are able to retain any sick or vacation days that have been accrued, although those benefits are usually not available for use during the layoff period.

In states that allow laid off employees to draw unemployment compensation during the company layoff, it is not unusual for the company to take the necessary steps to prepare the applications and other paperwork on behalf of the employees. This helps to ensure that there is some amount of revenue generated for the employees during the period of the layoff, and can act as an incentive for the laid off employee to not seek permanent employment elsewhere.

While a company layoff is usually implemented with an understanding that economic conditions will change, the layoff status may later be changed to termination. When this occurs, the former employees are able to receive compensation for accrued vacation and other types of personal days, as well as the opportunity to move from the group insurance coverage to another program.

WiseGeek is dedicated to providing accurate and trustworthy information. We carefully select reputable sources and employ a rigorous fact-checking process to maintain the highest standards. To learn more about our commitment to accuracy, read our editorial process.
Malcolm Tatum
By Malcolm Tatum
Malcolm Tatum, a former teleconferencing industry professional, followed his passion for trivia, research, and writing to become a full-time freelance writer. He has contributed articles to a variety of print and online publications, including WiseGeek, and his work has also been featured in poetry collections, devotional anthologies, and newspapers. When not writing, Malcolm enjoys collecting vinyl records, following minor league baseball, and cycling.
Discussion Comments
By Telsyst — On Dec 10, 2013
@Certlerant: One of the main differences between a furlough and a layoff is that specific time periods are usually given with a furlough, but not with a layoff.

A furloughed employee can also often continue to receive work-related benefits and, in some cases, even some pay. On the other hand, a laid off employee receives no pay or benefits from the company, but may be able to collect unemployment while laid off.

By Certlerant — On Dec 09, 2013

Is there a difference between a temporary layoff and a furlough?

Laid off seems to be more permanent than furlough, although I have known people who were called back to work after a layoff and who were never recalled after being furloughed.

Malcolm Tatum
Malcolm Tatum
Malcolm Tatum, a former teleconferencing industry professional, followed his passion for trivia, research, and writing...
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