The more than 650,000 Defense Department civilian workers set to begin mandatory furloughs on Monday may not take much comfort in this, but they’re not the first ones who’ve suffered under this kind of approach. The tech industry, too, has been known to use furloughs as cost-cutting measures when the going gets tough. In 2011, for example, Cisco imposed a week-long furlough on U.S., Canadian and Indian workers.
The DoD workers are required to take one day off without pay each week for about three months. That amounts to a roughly 20 percent salary cut during the period. Obviously, that’s discouraging. But while furloughs hit employee morale and can prompt workers to jump ship, government agencies have a big advantage over private companies here: a generous pension plan that’s hard to walk away from.
Still, furloughed workers are bound to feel their “psychological contract” with their employer has been breached. And apparently this kind of breach is fairly common. In a 2009 survey by consulting company the Hay Group, over a third of the 100 businesses it spoke to used furloughs to reduce costs.
In some ways, then, the drop in employee morale can be looked on as collateral damage. In a report on the subject, the Society for Industrial and Organizational Psychology points to comments from researcher Ann Huffman:
“Furloughs are pay cuts and employees do not like them,” said Huffman. “They can range from 1 day to several weeks, and the longer the furlough the more likely employees will perceive the employer has broken a psychological contract with them.”
That’s because employees have been promised a level of pay for a certain amount of hours worked, then have the promise broken, she said.
Organizations institute furloughs in a variety of ways, Huffman observes. Taking employees’ financial concerns into consideration, one employer exempted lower paid workers from its furlough. Others furlough all employees, no matter their pay. “The perception of fairness was important to employees, and the first furlough policy was perceived as fairer than the latter. It is likely that those employees gave more thought to leaving the organization,” Huffman said.
Even though furloughs can hit employee morale, most workers may prefer that route to outright layoffs, especially if they’re the ones in danger of receiving a pink slip.