Here's some potentially good news for business owners juggling your ever-shifting staffing needs and your desire to keep your fantastic employees connected to your business amidst the most topsy-turvy moment in your business' history.
A little-known and rarely used state unemployment insurance program subsidizes the wages of workers who are kept on the payroll with reduced hours instead of laid off. The program — known as work sharing — allows businesses to keep and retain that talent, so when things tick back up, you’ve still got your employees, and it allows those employees to pay their bills and stick with you through the hard times.
Work sharing programs are extraordinarily popular among economists, Republican and Democratic policymakers, employers and workers — at least those who have heard of them. The problem is that few have, even though economists say work sharing is one of the best ways to strengthen the labor market during a downturn.
Of the nearly 30 million people receiving unemployment benefits, only 309,000 — 1 percent — are getting them through a shared work program.
Congress sweetened the program’s appeal during the pandemic, promising as part of the CARES Act that the federal government would pick up the cost from the states through the end of the year, without an overall cap, but nearly half of all states still don’t have such a program.
“I’m sick of this being the ‘best kept secret,’” Suzan LeVine, commissioner of Washington’s Employment Security Department, told the New York Times about the program, officially titled short-time compensation. “It is the diamond in the rough of the unemployment benefits system.”
Work sharing is widely credited with saving jobs and easing the pain and severity of economic downturns. But while popular in Germany and other advanced industrial countries, such programs have had trouble gaining traction in the United States, where job protection laws are comparatively weak and layoffs are a ready solution when revenues drop.
States aren’t required to offer short-time compensation, and many choose not to devote the resources — like funds for updated computer technology — to create and run such a program.
One of the biggest problems, said Kevin Hassett, former chairman of President Trump’s Council of Economic Advisers and a longtime champion of the approach, is that most employers and workers simply don’t know about it.
California does indeed offer a work sharing program. Find the details here.
Although program rules can vary by state, companies must apply individually, and file a separate plan for each unit or category of workers. Employees are paid an hourly wage for the time they work, and receive state unemployment benefits for the hours they don’t. Though the program involves paperwork for employers, those who've used it said its benefits far outweighed the burdens.
Employers preserve their relationships with workers and avoid the costs of ramping back up and retraining. Workers avoid layoffs while retaining access to their health insurance and a steady income. And they have a better chance of fending off the longer-term side effects that often accompany layoffs, like permanently reduced income.
The federal Paycheck Protection Program, which offered forgivable loans to businesses that kept workers on the payroll, had a similar goal. But work sharing continues to help prop up businesses facing a slow recovery by allowing their staffs to divide the available hours.
For states, which have been clobbered by zooming costs and plunging tax revenues, work sharing is like finding a winning lottery ticket tucked away in a drawer. Many states have exhausted their unemployment insurance trust funds — which are financed by taxing employers — and been forced to borrow from the federal government to continue paying benefits.
With work sharing, the federal government pays the bill. As of July, Michigan had saved at least $212 million in unemployment pay, said Mr. Donofrio, who enlarged the program’s staff, had the state’s computers reprogrammed and streamlined the application process.
It can also mean significantly lower costs in the future for employers, whose unemployment insurance tax rates increase when layoffs rise. “A lot of businesses are saying this is too good to be true,” he said. “It seems like a solution to a lot of our problems.”
“There are huge incentives to players to use it and for states to promote it,” she said.
MORE INFO ON CALIFORNIA'S WORK SHARING PROGRAM.