COVID-19 considerations: furloughs and payroll

Q         As a nonprofit, we are concerned we may need to furlough several employees in the upcoming weeks. What considerations should we be aware of when furloughing employees?

A   The issues you must consider as a nonprofit are the same as those of a small business. Most importantly, ensure the process isn't discriminatory and has no discriminatory impact, such as the inclusion of a disproportionate number of employees who are female or over the age of 40, compared to the remaining employees.

The criteria for the selection of the furloughed employees should be based on objective factors. You will also want to review any employment agreements and leave policies to ensure no further special compensation is required for the furloughed employees under such circumstances.

You also need to be aware of the implications related to your employee benefit program, if you offer one. Review the health plan terms to determine whether you can continue to offer active coverage during the furlough. Expanded coverage for ineligible employees outside the terms of the plan without consent from the insurer may expose you to additional costs. This may mean you will have to arrange how employees can continue to pay premiums during the furlough to maintain coverage or contributions to flexible spending accounts (FSAs).

Also, if you offer a 403(b) plan to your employees, you will need to ensure the furlough won't trigger termination or vesting consequences for all participants.