More companies use worker furloughs in tough economy

To keep its workers off the unemployment line, Atlanta sheet metal contractor Gardner & Son has gone to shorter workweeks.

Marietta businessman Jimmy Miller is considering doing the same next month if business doesn’t improve. In the meantime, he keeps his 60 employees working, doing odd jobs around his two fence firms.

Enlarge this image

Hyosub Shin/hshin@ajc.com

Jimmy Miller (center) supervises workers Charles Sims (left) and Raul Ruiz as they paint a utility trailer. Miller, who heads two fence companies in Marietta, is trying to ensure his 60 employees get 40 hours a week by assigning odd jobs. But Miller says furloughs could begin next month.

PRO
• Lets employers keep workers through rough economic times.
• Lets workers who have to leave their job for a period of time without pay keep their benefits such as health care.
• Can be less costly than layoffs, which often include severance packages and other expenses for exiting workers.
• Keeps employers from having to spend money on hiring or retraining workers when the economy improves.

CON
• Doesn't work for companies that are in industries that are dying or going through major transitions where many customers will not return.
• Could raise legal and benefits
issues in the case of protracted furloughs.
• Could be costly in the short term if there still is not enough work for employees to do.
Source: Staff research

LOOKING FOR A JOB?
• Your guide to metro Atlanta jobs
• Career advice, blogs and news
• Coping with a layoff
• How does your salary compare?

Just last week, Georgia lawmakers said 100,000 state workers will likely be furloughed to rein in the state’s $2 billion budget deficit.

And at the Buckhead office of Dr. Bruce Edelstein, the staff takes a day off when patient bookings are thin.

Once routine for government employees, autoworkers, airline pilots and flight attendants during economic lulls, furloughs or temporarily cutting employee hours are being used by more U.S. companies in what’s become a particularly brutal recession.

Unlike the sting of permanent layoffs, furloughs let companies and government agencies keep workers and avoid costly hiring or retraining when conditions improve, some experts said. It can be particularly valuable for businesses that expect customers to return when the economy rebounds.

“It’s increasingly being used throughout the economy,” said Mark Vitner, senior economist at Wachovia Corp. in Charlotte. “Mainly because so many companies are having a hard time finding skilled and capable workers during the good times that they don’t want to have to go through that again in a year or two when the economy comes back. They’re hoping to keep people.”

California attorney Alison Hightower said the 700 lawyers at her firm have been inundated with calls from employers nationwide “asking questions about furloughs and other ways to reduce hours, workweeks and labor costs besides layoffs.”

The intense interest in furloughs comes at a time when many companies are on second and third rounds of job cuts and American workers are taking a beating.

Nearly 3.5 million jobs have vanished in the past year. And just last week the number of Americans filing initial unemployment claims soared to a 26-year high of 626,000 and the unemployment rate for January jumped to 7.6 percent.

While corporate giants continue to jettison workers by the thousands, some manufacturers, media companies, doctors, dentists and plenty of other businesses have instituted or are considering shorter workweeks or unpaid time off — anything short of layoffs, which can be expensive and heart-wrenching.

That’s Miller’s goal. His family’s fence businesses, Marietta Fence Co. and Circle A Fence Co., have never had a layoff.

“My dad prided himself that he’d never had a layoff, and I am trying to keep that tradition alive,” Miller said. “I can’t say with certainty that I’m going to be able to do so. But my fear is if we let people go they will not be able to find another job. Under these conditions, the odds of them being able to find re-employment are pretty slim.”

At 8.1 percent, Georgia’s unemployment rate is at a 26-year high. Miller’s employees would join the already hundreds of thousands of jobless Georgians looking for work.

“The majority of our employees are married and have more than one child,” he said. “We’re affecting families, and that bothers me.”

What bothers him even more is how little unemployment benefits are for jobless workers in Georgia — a weekly average of $271.

“You might be able to buy groceries, and that’s about it,” he said. “God help you if you’ve got a house payment.”

To keep his workers from having to collect unemployment, Miller said he has them do painting, cleaning and other odd jobs for the companies.

“Whatever we can do to get them to 40 hours,” he said. “We’re resisting layoffs as long as we can. I’d rather cut them back than eliminate [jobs]. Something’s better than nothing.”

Many industries that have been immune to downturns in the past are now scrambling to figure out ways to deal with this recession.

Take Gannett Company Inc. Hit by declining advertising revenues, the nation’s largest newspaper publisher recently told workers to take an unpaid week off by March.

“We would expect to see furloughs mainly where an economic downturn is substantial, broadly based across the economy and not expected to be permanent,” said Barry Hirsch, an economics professor and Usery Chair of the American Workplace at Georgia State University.

Employers who use furloughs aren’t as worried about losing workers to other jobs when a downturn is as severe as the current one, Hirsch said.

On the other hand, companies that don’t expect to see their business rebound are more apt to make permanent cuts such as layoffs, he added.

The worsening economy has forced state and local governments to use furloughs more now, given the decline in sales tax revenue and falling home values.

In addition to state workers, Fayetteville teachers have been furloughed along with city of Atlanta workers. Atlanta Mayor Shirley Franklin has come under fire for her decision to use furloughs.

The head of the Atlanta firefighters union calls the practice “detrimental” for mission-critical jobs such as fire, police and rescue. Franklin ordered the furloughs to deal with the city’s $50 million revenue shortfall.

“We understand employers want to use furloughs to hang onto highly trained, highly skilled workers,” said Jim Daws, a lieutenant with Atlanta fire and rescue and president of the International Association of Fire Fighters Local 134. “It pulls down staffing below need. It translates into more dangerous working conditions.”

In addition to being furloughed, the city’s 850 or so firefighters have had overtime taken away and seen their pay cut 18 percent, Daws said.

“Almost all of them have at least a second job, and many have a third job,” he said. Still, he conceded, furloughs may be a necessary evil in this economy.

“It’s better to have a job than not have a job,” he said.