Tech Companies Should Try Furloughs Instead of Layoffs
With news of layoffs at Google, Microsoft, Salesforce, Meta, and elsewhere, I’ve been doing a lot of thinking about what it means to individual career management in the tech industry over the next decade. Since most of the companies executing layoffs are citing “macroeconomic conditions”, I wonder if we’re entering an era where tech employment is more cyclical and if we should look harder at different models of employment and unemployment.
One place to look for inspiration (for better or worse) is the auto industry. Nobody has more experience with macroeconomic cycles impacting the size of the workforce than Detroit. And to be sure, automakers definitely have experience with big layoffs. But they also use a different tool in their toolbox — the furlough. And I wonder why more tech companies don’t give this a try.
How does a furlough work? Instead of terminating the employment relationship, companies suspend excess employees at reduced or no pay. During that time, the furloughed employee generally retains access to benefits and can collect unemployment. When the business justifies it, the employee may be called back to work, perhaps at a different position or with reduced pay. Of course, since most of these folks are at-will in the U.S., it’s also possible that during the furlough period the employee finds a new job and goes their own way.
For big tech companies that have historically struggled (and spent a lot of money) to recruit, train, and retain engineers, this seems like a clear win. When the tech economy rebounds (and it will), they’ll have a ready stream of talent already familiar with their systems to bring back. And versus paying severance, it may actually save money. For employees — many of whom identify very closely with their companies and coworkers — this may result in reduced career and life upheaval.
I know of one tech company that did try a furlough a couple of years ago, but unfortunately I don’t have insight into how it worked out for them. Regardless, it seems like furloughs are something that more executives and HR professionals should think about.
