What is unpaid leave?

Unpaid leave refers to time off from work during which an employee retains their job, but does not receive a salary. 

Employees (in the U.S.) are permitted to take unpaid leave for:

  • Self-care, involving a serious health condition
  • Family emergency
  • Parental leave for birth or adoption of a child 
  • Transition of an employee or their spouse to active duty

Employers who issue a mandatory unpaid leave, also known as a furlough, usually do so in order to:

  • Lower company expenses during a difficult economic period
  • Cope with company setbacks and re-balance budget
  • Save costs during the off season (relevant for seasonal work)

Furloughs reduce the work hours, days, weeks, or months of an employee, and vary depending on the needs of the employer. Companies often implement a rotating furlough, in which they rotate employees to take their unpaid days at different times throughout the month. An alternative is to institute unpaid leave all at once, over a few consecutive weeks or months. 

Businesses which run only during certain seasons, often implement planned unpaid leave for employees. Ski resorts, for example, which only open in the winter, can let employees know ahead of time that they will only hire them during the active season. 

Why should HR leaders care about unpaid leave?

Mandating unpaid leave to employees amidst a company setback can:

  • Lower expenses 
  • Eliminate the need to recruit new hires
  • Protect existing jobs 
  • Keep the company afloat until the economy improves

HR leaders should be mindful that unpaid leave does involve risks:

  • Employees gaining employment elsewhere 
  • Interrupts work progress and momentum  
  • Lowers the remaining employees’ motivation, engagement, and work productivity

What can HR leaders do to improve the employee experience during mandated unpaid leave?

HR leaders can alleviate some of the tension for furloughed employees through:

  • Transparently discussing company guidelines and country (and state) laws regarding unpaid leave, including:
    • No-work policy for employees (exempt and non-exempt)
    • Eligibility to use vacation days, or other paid time off, to receive wages 
    • Health insurance benefits
  • Notify employees in advance if possible (some companies are required by U.S. law.)

Unpaid leave can take a stab at an employee’s dignity, as well as their bank account, so show appreciation and compassion as they go through this trying time. Employees will be more likely to come back to work at the end of the leave if they know that they are valued.

And let’s not forget about the homefront. During difficult times, it’s vital that HR leaders boost employee morale in the office and implement practices to keep employees engaged:

  • Increase employee autonomy. Challenging times push individuals to assume greater responsibilities. Encourage employees to step into the mind of a small business owner. Let them tap into their resourcefulness and develop their problem-solving skills. This will allow each employee to contribute  and realize their own value to the company. 
  • Express appreciation. Letting employees know that the company appreciates their hard work reinforces their self-confidence and reminds them the importance of their dedication.
  • Cultivate positivity. When employees are anxious, it’s easy to be mean to each other. But don’t let that happen. Plan team-building, fun, activities, to  strengthen relationships. Set up spaces throughout the office for employees to hang out, relax, or find calm respite . 
  • Two-way Conversations. Updating employees on changes and what to expect can directly reduce their stress and anxiety. Ask employees what you can do to ease their situation. This shows you care, and builds their trust in the company.  

How can a thoughtfully planned unpaid leave impact company culture?

Unpaid leave can be a rocky road– for everyone. Furloughed employees may feel stressed out due to the unexpected shake-up in their lives, and non-furloughed employees may walk around in a constant state of fear for the future of their own jobs. 

 But HR leaders can use upheaval in a company to their advantage. They can use it to strengthen relationships, cultivate gratitude, and develop the individual talent they do have in the office. While mandated unpaid leave can negatively affect the company culture of any office, it’s an opportunity to nurture the culture to become a more resilient, kind, and supportive place for employees.