Economic depressions have many effects on the economy of a country

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Honeywell

Economic depressions have many effects on the economy of a country, one of which is employee layoffs due to decreasing revenues. Companies and businesses can also deal with the recession through furloughs, which involves employees taking a periodic leave of absence, which is unpaid. As the economy begins to improve, the company can then rehire the workers. However, furloughs have a detrimental effect on employee morale. Those laid off temporarily usually feel that they are not valued or that they are not as crucial as their colleagues who stay on. They may not be willing to come back to the company later. In addition to this, those who remain working face the uncertainty of whether they too will be sent on unpaid leave, which will affect their performance.

Furloughs will have a lower impact on turnover rates as compared to layoffs. A recession usually affects every part of the economy; hence, it is unlikely that the employees will find work elsewhere. However, management needs to be very clear when implementing the furloughs. Honeywell chose to carry out employee performance reviews to decide who would stay on and who would be sent on leave. Such a situation may suggest that those on a temporary leave of absence do not do a good job or as not as useful in the company, and this would lead to anger and bitterness. The company should make it clear that it has no choice but to send some of its employees on unpaid leave for a period, but only because of the current economic conditions. Management should then start implementing furloughs on non-essential employees while ensuring that the process is fair. If the process is handled well, the employees will be willing to come back to work at a later time. This will result in a lower turnover rate compared to layoffs, and the company also gets to retain its best employees.