A temporary suspension of employment for a specified period of time during which employees do not receive wages. A furlough can occur as planned time off based on a pre-planned schedule. For example, an employer may have an annual practice of closing its office for a week during the year-end holiday season.

An employer may also implement a furlough as a cost-saving mechanism. For example, in response to a downturn in business, an employer may choose to place employees on furlough, rather than institute a permanent reduction in force. Employers must be careful when placing exempt employees on furlough, to ensure it is carried out in a manner that does not void their exempt status. For further information, see Practice Note, Conducting Layoffs and Other Reductions in Force: Temporary Cost-Saving Measures before any Layoff.