Company layoffs, even though temporary, can be devastating for employers and their workers.
The employee isn't getting a paycheck anymore and must go through the process of filing for unemployment benefits and continually looking for other work to keep qualifying for the benefits.The employer loses someone on whom he has spent a considerable amount of money for training and is liable for unemployment benefits.
There is a new concept, work sharing, that is in effect in several other states and has been introduced to the State Industrial Commission's Employment Security Advisory Council by Terry Burns, unemployment insurance director for the Utah Department of Employment Security.
Burns said the work sharing concept will receive plenty of the council's attention next year and could result in an attempt to change some sections of Utah's employment laws to make work sharing become a reality.
He considers work sharing a "win-win" situation with employees and employers. Only veteran employees might not like work sharing. It could affect their retirement since work sharing reduces their income and most retirement levels are based on income levels in the final few years of a person's work.
Burns provided a comparison of how a company usually handles a temporary layoff and how it can be done with work sharing.
Company officials feel the need to reduce the staff by 40 percent, which means 40 percent of the employees are unemployed and qualify for full unemployment insurance benefits.
The employer incurs the cost of the reduction in force and loses the skills of the terminated employees. When normal business activity is resumed, many of the laid off employees are no longer available and the company stands the cost of training new people.
Under work sharing, the company still needs to reduce its staff by 40 percent but does so by reducing employees from five to three days per week of work. All affected employees receive 40 percent of their weekly unemployment benefit amount and the employer maintains his skilled work force and employees maintain 80 percent of their wages.
As an example of work sharing's financial impact, let's take a person earning $400 per week who is reduced from five days to three days per week. Wages would be $240 ($400-$160) and the unemployment benefit will be $80 (40 percent of $200).
The $320 in income is only a 20 percent loss while hours were reduced by 40 percent, Burns said. Under the present program, a person making $400 per week qualifies for a maximum unemployment benefit of $214 per week.
Work sharing will require some legislative changes, Burns said, because a person's income while working a second job wouldn't be deducted from a person's unemployment benefits, up to the maximum amount allowed, of course. Also, the law would have to identify those employers eligible to offer work sharing and identify an application process.