As employers begin to plan for their employees’ return to work, many are unable to maintain the size of their workforces in light of the ongoing economic downturn. As they plan for layoffs or long-term furloughs, employers should also be aware of the possibility of an unemployment workshare program. The main difference between a layoff or furlough and a workshare program is that such a program can provide unemployment benefits to employees while maintaining some level of employment. Basically, a workshare program allows employers to reduce employees’ work schedules and allows employees to receive unemployment benefits that cover at least some of the difference in wages. Due to additional benefits that may be paid under the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”), employees may even be able to take home higher wages under a reduced schedule than they otherwise would during full-time employment.
This post describes workshare programs and the potential to benefit qualifying employers.
Know that not all employers are eligible to participate in workshare programs.
At present, 26 states and the District of Columbia offer workshare programs. These states include Arizona, Arkansas, California, Colorado, Connecticut, Florida, Iowa, Kansas, Maine, Maryland, Massachusetts, Michigan, Minnesota, Missouri, Nebraska, New Hampshire, New Jersey, New York, Ohio, Oregon, Pennsylvania, Rhode Island, Texas, Vermont, Washington, and Wisconsin. The CARES Act provides federal funding to states with workshare programs that meet certain guidelines, and this funding provides an additional $600 per week to eligible unemployment benefit recipients through July 31, 2020.
To participate in a workshare program, an employer must submit a workshare plan to its applicable state agency explaining the ways in which the workshare program eliminates the need for a layoff. State specific requirements vary and can include providing advanced notice to employees or offering training to enhance job skills. Though the maximum amount of reduction varies by state, employers generally must reduce their employees’ weekly hours and wages between 10% and 60%. Employers must also continue to provide benefits to affected employees.
Workshare programs may benefit both employees and employers.
Workshare programs may be beneficial to employees because they are able to avoid being laid off and instead retain their employment during these difficult times. While employees avoid becoming unemployed altogether, they also benefit from partial unemployment insurance benefits, which they may otherwise have not been eligible to receive. Ordinarily, many employees would be ineligible for unemployment benefits due to a slight reduction in hours because their wages would still exceed the weekly unemployment benefit amount. Under a workshare program, however, these partial unemployment benefits are combined with employees’ reduced payroll wages. In certain circumstances, affected employees could earn more than they normally would during their full-time employment.
In Texas for example, a valid workshare program requires a reduction in hours and wages between 10% and 40%. An employee who makes $40,000 per year or $769.23 per week would normally be qualified to receive only $400 per week in unemployment benefits. If the employer reduced the employee’s hours from 40 hours per week to 32 hours per week—a 20% reduction—the employee would receive $80 per week in shared work benefits. This is in addition to the employee’s wages from his continued 32 hours per week of work. And under the CARES Act, the employee is eligible for an additional $600 per week just by qualifying for $80 in workshare benefits. The employee therefore increases his wages from $769.23 per week to $1,295.38. A sample calculation is below:
• $40,000 (annual wage) / 52 (weeks per year) = $769.23 (weekly wage)
• $10,000 (highest quarterly wage in base period) / 25 (workers’ compensation formula) = $400 (weekly benefit amount)
• $400 (weekly benefit amount) x .2 (20% percent of reduction in hours and wages) = $80 in workshare benefits
• $80 (workshare benefits) + $600 (CARES Act benefit) = $680 in partial unemployment benefits
• $680 (partial unemployment benefits) + $615.38 (reduced employer wages) = $1,295.38 (total wages during workshare)
While the monetary benefit to employees is obvious, workshare programs have potential benefits for employers as well. By retaining employees, employers benefit from the months or years of training invested into their employees and avoid a competitive hiring market that may come when competitors have fully resumed operations. This employee retention also eliminates the economic loss that employers face when onboarding new employees hired to replace those that it laid off. Employers also benefit from the increased company morale when employees are informed that the reduced work schedule is an effort to retain as many employees as possible. Employers may even propose the program to their employees as a means to afford employees more time to homeschool their children or care for loved ones affected by COVID-19.
Employers also benefit from lower unemployment benefit tax chargebacks than they would under a mass layoff. Finally, while requirements vary by state, workshare programs are generally flexible. In Texas, employers may have multiple workshare plans that vary by department and may renew the program after it expires. Texas employers may also stop or continue the program as needed if, for example, the employer needs to return employees to a full-time schedule for one or two weeks.
The Bottom Line for Employers
While posing certain administrative burdens and not available in every state, workshare programs have the potential to benefit employees and employers and should be one of the options an employer considers as it looks to cut costs while retaining talent and operational flexibility.