As the next recession draws ever closer, more and more states are adopting a program aimed at helping companies avoid, or at least minimize, the necessity of layoffs. It's called "work-sharing" or "short-time compensation," and it allows companies to put employees on a shorter workweek and then augment their salaries with a prorated amount of unemployment compensation.
Since 1975, some form of work-sharing has been introduced in nine states -- Arizona, Arkansas, California, Florida, Maryland, Oregon, Texas, Washington, and New York. Officials in these states say that the program has indeed reduced unemployment. In Washington, shared-work coordinator Randall Yule reports that 250 companies have used the program since 1983, and 1,200 layoffs were averted during the past year alone.
The rules governing the program are roughly similar from state to state. Under Arizona law, for example, a company can take advantage of work-sharing if more than one of its employees has agreed to participate in the program. An employee's hours can be cut back no less than 10% and no more than 40%, and participation must be voluntary, since any work-share compensation that employees receive will have an effect on future unemployment compensation due to them in the event of a complete layoff. So long as the unemployment rate is below 7.5%, employees are eligible to receive work-sharing funds for only 26 weeks out of each year; above that mark, the program kicks in for a full 52 weeks.
The level of an employee's work-share payment is determined by prorating unemployment compensation according to the reduction in an employee's work hours. If, for example, an employee's hours were cut back 20%, then the worker's weekly take-home salary of, say, $400 a week would be reduced to $320, and the employee would receive 20% of the unemployment compensation due to him or her in a full layoff. Assuming that the employee is entitled to a weekly unemployment benefit of $185 (the maximum level in some states), the worker could qualify for as much as $37 in work-share compensation, for a total weekly income of $357.
Such a program can be a lifesaver for hard-pressed companies. A case in point is Mountain States Mineral Enterprises Inc., based in Tucson, which provides research, engineering, and construction services to the mining industry. Back in 1981, the company had annual revenues of more than $40 million and a strict no-layoff policy. Then came a severe recession in early 1982, and Mountain States Mineral was forced to reevaluate its policy. In order to minimize layoffs, the company decided to try work-sharing.
Between February 1982 and March 1983, Mountain States Mineral's work force was reduced from 309 to 150 employees. Among the employees who remained with the company, many found themselves working from 28 to 32 hours per week. It was a difficult period, but the company survived. Today, the majority of the employees are back to working full-time.
"Without this program," says Bob Blocher, director of corporate planning and services for Mountain States Mineral, now a greatly trimmed down $10-million-per-year company, "we would have lost some very talented people. Our line engineers had been with us an average of six and a half years, unheard of for that position. And many of them are still with us today. We're not out of the woods yet, but we're getting there."