Economic Development, Government, and Human Resources

Michigan Work Share offers alternative to layoffs

April 24, 2015
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To avoid layoffs during a slowdown, Michigan employers can now reduce hours employees work during the week through a work sharing, unemployment insurance program.

The Talent Investment Agency, a new state workforce agency within the Department of Talent and Economic Development, is providing employers a creative strategy to avoid layoffs during a business decline through a voluntary, short-term compensation program administered by the Unemployment Insurance Agency known as Work Share.

Work Share not only allows employers to maintain their skilled workforce, but also helps workers keep their employment during a temporary business decline by reducing the number of work hours for a group of affected workers rather than conducting layoffs.

As an unemployment insurance program, Work Share provides partial unemployment benefits to those employees who have had their hours reduced.

Lynda Robinson, from the office of communications at TIA, said employees receive a portion of weekly unemployment benefits based on the percentage of the reduced hours of work and pay. If a business owner with 100 employees needs to reduce its staff by 20 people, the employer can retain all workers through the Work Share plan and reduce their work week from five days to four days, according to Robinson.

“This will achieve the desired 20 percent reduction in payroll. While weekly benefit rates vary from person to person, if a worker was fully unemployed, their weekly benefit amount would be, for example, $360,” said Robinson in a written statement. “Under Work Share, a worker whose hours were reduced by 20 percent would receive a $72 Work Share benefit.”

Stephanie Comai, director of TIA, said the Work Share program helps businesses by allowing them to keep their skilled workforce intact.

“Keeping productive and talented workers during a temporary slowdown allows employers to gear up quickly when business conditions improve,” said Comai. “This program is a perfect addition to Michigan’s toolbox as we focus on retaining and training workers with the right skills to help ensure Michigan’s economy continues to grow.”

As a short-time compensation program authorized through the Layoff Prevention Act within the Middle Class Tax Relief and Job Creation Act of 2012, Robinson said the idea behind the program is for individuals to maintain employment and return to full-time work when the business is in a better financial position, and for employers to avoid the costs of hiring and training new employees.

“Employers benefit by being able to retain trained employees and avoid the expense of recruiting, hiring and training new employees when business conditions improve. They can maintain production and quality levels,” said Robinson. “Employees continue to work, earn wages, and are spared the hardship of full unemployment. Even though work hours are reduced, employees maintain their health and retirement benefits under the same terms and conditions as if they were not reduced.”

The Middle Class Tax Relief and Job Creation Act of 2012 included provisions to expand a creative layoff aversion strategy, known as work sharing, as an option within the federal-state unemployment insurance system, according to a National Employment Law Project and Center for Law and Social Policy joint report in 2012. With the enactment of the act, roughly $500 million was allocated in temporary funding to states to adopt or expand a short-term compensation program alternative to layoffs.

Through the Work Share program, the partial benefits given to workers who are in the short-term compensation plan will be charged against a Michigan employer’s unemployment insurance tax account. The federal government will reimburse the state roughly 92.7 percent of the partial benefits paid to workers through Aug. 22 of this year as an incentive included in the federal act, with the remaining 7.3 percent charged to employers’ unemployment insurance tax account, according to a press release.

“Work Share is paid for by the employers through their regular UI tax contribution or reimbursement process,” said Robinson. “Nothing is deducted from employee wages to pay for Work Share benefits.”

To participate in the program, employers must be facing a business decline, such as a reduction in production, sales or an economic downturn, and must maintain a number of requirements including current unemployment taxes, a positive account balance reserve, and have paid wages for at least 12 previous quarters.

Other requirements include having to certify participation in the program is in place of employee layoffs, the inability to hire or transfer new employees into the group, reduced hours are between 15 percent and 45 percent, and include a minimum of two employees for a period up to 52 consecutive weeks.

In terms of employee qualification for enrollment, a worker has to be eligible for regular unemployment benefits, be a full-time worker and have earned enough wages to establish an unemployment claim.

Sharon Moffett-Massey, director of the Unemployment Insurance Agency, said the program is flexible and a great benefit for workers.

“(It) allows employers to enroll some or all of their employees, and they can reduce the employee’s hours anywhere from 15 to 45 percent per week,” said Moffett-Massey in the release. “It’s also a great benefit for workers, who are spared the hardship of full unemployment and are able to retain their health insurance and other benefits.”

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