Plowing through a furlough: The numbers

Going through a furlough — a temporary non-work, non-pay status, also known as a reduction in hours or a partial layoff — is a financial hardship.  Even if you’ve gotten into the right mindset, paychecks will still be smaller for a little while if the furlough goes through.  Even if you’ve fully internalized that the 20% reduction in pay is better than a 100% reduction in pay, it’s still a reduction in pay.

A next good step to take following the mental preparation is some number-crunching.  Feeling good is fine, but getting a quantitative handle on the financial extent will help even more.

  • Determine the timing of the furlough.  When will the furlough begin?  By law there needs to be at least 30 days’ notice before a furlough begins.  The furlough should not be sudden, and from the official notification the length and timing of the furlough period should be clear.  From this, you’ll know which paychecks will be short on hours — usually either eight or sixteen hours in a biweekly, 80-hour paycheck.  From this information, if you already have your personal budgeting information, determining which months’ cash flows will be affected will be clear.
  • Determine the reduction in pay due to the furlough.  Following this, what’s the bottom line?  How much are those paychecks going to shrink?  A good estimate of the reduction in gross pay — before any deductions are taken out — is simply to prorate the paycheck for the number of paid workdays during the pay period.  So, for one furlough day a week, the gross pay would be 80% of the normal amount.
  • Determine the reduction in the actual paycheck due to the furlough.  The net pay — or the takehome pay — is likely not going to be 80% of the normal paycheck.  The reason for this is the nature of the deducted amounts.  Some of the amounts will change with the reduced gross pay, and others won’t.  For example, health insurance and flexible spending account amounts will not change, but tax withholding and percentage-based retirement account contributions will change.  The best way to see what the changes will be is to use a furlough calculator.  Just grab your pay stub, and enter the numbers.

Getting the timing, and the amount, of the paycheck reduction will give you a target to shoot for.  Getting this information should take most of the uncertainty out of the financial component of the furlough.  It won’t solve the financial component, but it will define it.

With these numbers in hand, the next steps will involve ways to meet that target.

John Wedding

Husband. Father. Web publisher. Musician. John has blogged at Mighty Bargain Hunter since 2005, helping people to recognize life's good deals.

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