Need to cut costs for the short term? If you’re planning to reduce your employees’ hours, there’s probably no option with less impact on your business and your employees than the federal Work Share program. More than half of U.S. states offer it. Also known as short-time compensation (STC), the point of this program is to save jobs during business disruptions by reducing employees’ hours, with unemployment insurance making up part of the difference in pay.
If your business qualifies for the state-administered STC program, the employee hours that have been cut would be eligible for unemployment compensation (UC).
To see if your business is located in a state that participates in the STC program, check here. You must apply through your state’s governing labor agency, and the reduced hours you propose must be in lieu of a layoff. Some states dictate that this hourly reduction be no more than 20% of the average workweek.
Work Share’s Benefits to Employers
A key benefit of the Work Share program is that it provides a financial incentive for employers to avoid laying off employees during a temporary business setback. By avoiding layoffs, you’re avoiding the downstream costs of hiring and training new employees when your business regains momentum. Not to mention the potential immediate and lasting negative effects on employee morale. You also may be saving yourself a lot of regulatory headaches. If you employ more than 100 employees, your employment practices are governed by the federal Worker Adjustment and Retraining Notification Act (WARN), which stipulates a 60-day notification requirement for employers planning mass layoffs. Keep in mind that your state’s employment laws regarding layoffs may also add restrictions.
How Employees’ Benefits Are Calculated
STC benefits are calculated on a pro rata basis and paid through your state’s unemployment insurance trust fund.
Let’s say one of your employees is working a 40-hour workweek, but you plan to cut her hours by 20 percent. If she were to be laid off, let’s say that she would qualify for a regular UC payment of $250 a week (payment varies by state – this is an example). Since she’s losing just 8 hours (20 percent) she would receive 20 percent of $250 to compensate her for her lost weekly wages ($50). She’d receive that $50 UC in addition to the wages she’d receive for working a 32-hour workweek while participating in the program.