Work Share Could Save Your Small Business Money

During challenging economic times, small businesses have to make tough choices when they are strapped for cash. In March 2020, the CARES ACT prompted a spike in work-share programs across the country. The Keystone Research Center found that employer work-sharing grew to by six times the practice's pre-COVID level. Would a work-share program save your small business money? How do you create such a program for your employees?

What is work-sharing?

The Department of Labor provides short-term unemployment insurance for employers with an approved work-share program. A work-share effectively reduces an employees hours on the job, their wages and benefits. The benefit is offered state-by-state. The CARES Act provided a 100% subsidy for states offering this alternative to layoff or furlough. The former is a separation from employment where no blame is assigned and the latter represents a mandatory unpaid leave. new paragraph here?Although an employee experiences a loss of some wages and benefits, work-sharing is a way to keep people employed and keep the economy going.

Benefits of work share to employees

The primary value of work share to employees is that it provides some level of income and benefits that they and their families need. A secondary advantage is that it keeps unemployment levels in a community and across a state down. Other benefits of the program are that employment mitigates the stress of joblessness and the potentially catastrophic costs of healthcare on families.

Does work-sharing save companies money?

Companies in states that provide unemployment insurance for work-sharing receive government assistance for keeping their employees on the job at reduced rates. Why is this preferable to employers than a layoff or furlough?

When demand drops low enough that a small business has to consider cutting workers from the payroll to meet their debt obligations, they must also think about how they'll meet rising demand. Recruiting and hiring new employees is costly. There is no guarantee that previous employees will return to their old jobs at the same pay or at all. An employer who can take advantage of work-share unemployment insurance could save resources and reduce the cost of rehiring when the economy returns.

Small businesses with limited human resources may find furloughing nonexempt and exempt employees challenging due to contractual obligations and legal considerations. Additionally, exempt employees are entitled to their salary if they work any part of a workweek. Tracking the details of furlough may cost a small business much more than it saves them in administrative work, not to mention the potential risk of noncompliance.

How to start a work-sharing program at your company

Currently, 27 states allow employees to claim work-share benefits. Work sharing is also known as short-time compensation by the federal government. Under the Middle Class Tax Relief and Job Creation Act of 2012, employers must submit an employment plan to the state for approval. For more information on the requirements to create a work-sharing program at your company see the National Governors Association's website.

Small businesses in need of legal advice on employment matters can reach out to the Law Offices of Donald W. Hudspeth, P.C.

Categorised in: Starting a Business in Arizona

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