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Stabilizing Employment Through State Unemployment Workshare Programs – Employee Benefits & Compensation



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Is the U.S. economy trending toward recession? Rumors of a
recession are circulating. Many companies are considering, or have
already implemented, plans to reduce overall headcount. Inflation
fears and rising interest rates are also driving concerns about a
recession. Regardless of whether the United States enters into a
recession, as formally defined by a broad set of indicators,
layoffs remain a part of the economic cycle. Employers may be able
to alleviate some of the stress and burden associated with economic
downturns by working with state unemployment agencies. State
unemployment agencies have created workshare plans to provide a
soft landing for employers and employees at the bottom of an
economic cycle.

Workshare plans allow employers to enter into agreements with
state unemployment agencies to reduce employee hours without laying
off employees or disqualifying them from state unemployment
compensation benefits to supplement their reduced wages.
Approximately half of U.S. states have workshare or shared-work
plans.

This arrangement effectively allows employers to take a tempered
approach to layoffs and add another option to their responses to
economic downturns. This approach may result in a number of
benefits for employers. Below are some of the advantages of
utilizing a workshare program.

Employee Retention

Employers that use workshare programs may find that they have an
easier time retaining employees during the economic downturn.

Employers may find that employees who receive pay from their
employers while working a reduced schedule, but who also receive
unemployment benefits, may decide to refrain from looking for a new
job. Generally speaking, while the employee may realize a small
decrease in salary under the workshare program scenario, the
employee may feel reassured that the employer is putting forth
effort to retain the employee by providing as many hours and as
much pay as possible during a slower economic period.

To qualify for the receipt of benefits, unemployment
compensation recipients generally must show that they are actively
searching for jobs similar to the ones they recently lost.
Typically, they must show proof of job searches each week.
Workshare programs remove this requirement or limit the requirement
to seeking supplemental employment instead of full-time employment.
Thus, one benefit of Workshare programs is that they ease the
employee’s burden of seeking full-time employment in order to
receive benefits. Additionally, the employee may be less likely to
look for a job because he or she does not have the same job-search
obligation that is typically required of unemployment compensation
recipients.

Contribution Rate Protection

Unemployment contribution rates are generally calculated by
comparing how much an employer contributes to a state unemployment
compensation system versus the benefit claims submitted against the
employer’s account by former employees. Workshare programs
reduce the unemployment compensation benefits due to current
employees working on reduced schedules. The employer retains a
degree of control over the amount the employees can claim by
determining how much work is available during an economic slowdown.
An employer considering a workshare program may want to perform a
calculation based on the states where the employer has employees to
determine the potential impact to the employer’s contribution
rate before entering into a workshare program.

Employees in workshare arrangements may also be less likely to
be long-term recipients of unemployment compensation benefits.
Discharged employees may not readily find other jobs, so they may
be charging benefits against their former employers’ accounts
for considerable amounts of time, perhaps even after an economic
slowdown has concluded. Employers with workshare arrangements may
be able to prevent employees from joining the ranks of the
long-term unemployed by ensuring that they continue working through
an economic slowdown and are available for full-time employment at
the conclusion of the slowdown.

Employment Benefits

Employers with workshare arrangements may continue to provide
benefits to employees with reduced work schedules, whereas they
would not provide the same benefits to former employees.
Reduced-hour employees may retain access to health insurance,
seniority status, paid leave, and retirement plan participation.
The maintenance of their employment benefits may cause some
employees to stay loyal to an employer, especially when the
employer continues to provide benefits through an economic
slowdown.

Reduced Administrative Burden

Employers may need to take administrative action to enter into
workshare agreements with their respective state labor agencies,
but they may manage all employees involved in a workshare program
collectively. Conversely, an employer that lays off a significant
employee population without utilizing a workshare agreement would
run the risk of having to manage the separate unemployment claims
of individual employees. Managing unemployment claims can be a
significant administrative burden for employers that may be
mitigated by workshare arrangements.

Key Employer Considerations

Employers may want to consider adding workshare arrangements to
their repertoire of unemployment management options. Workshare
programs potentially can help employers maintain better employee
relations while retaining talent that may not be easily replaced.
In addition, employers, employees, and state labor agencies alike
may benefit from workshare programs that may reduce unemployment
and facilitate continued employment.

The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.

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