Instead of laying off workers, companies should explore shared-work programs

Let’s say you’re running a company in Pennsylvania or New Jersey and you’re facing a temporary shortfall in orders or services, or there’s an economic downturn. You don’t have enough work for your existing employees but you don’t want to let them go. Laying off these workers means you could lose them forever, which can be particularly painful if those workers are skilled in their jobs and have experience. It’s also costly to find and train new workers. It’s bad for morale. Workers don’t want to lose their jobs either, of course.

But there is another option: shared work. Both the Department of Labor and Industry in Pennsylvania and the Department of Labor Workforce and Development in New Jersey have programs that can be instrumental in keeping a company’s workforce intact, even during the most challenging of times.

Under Pennsylvania’s Shared-Work Program, for example, an employer does not actually lay off their employees. Instead, the employees’ hours are cut between 20% to 40%. The company pays for the hours that the employees work and the remaining time is paid by the state through its unemployment insurance program.

By sharing the costs of keeping these workers employed, the employees still have their income and — just as important — their benefits, like health insurance and retirement. Employers can retain their workers and their skills. The state avoids having to use taxpayer dollars to pay for full unemployment costs. Everyone wins.

For Ivy Rinehimer, who works as the human resources director at Noble Biomaterials, a 60-person manufacturing company based in Scranton, the program was crucial in helping her company during slower periods.

“Our company is very unique,” she said. “We metallize materials like foam fabric and yarn, and what we do requires a high amount of experience, training, and skills,” she said. “We’ve had a few downturns and we didn’t want to lose these skilled workers. The shared work program helped us keep them employed with us.”

Susan Dickinson, director of the Office of Unemployment Compensation Benefits Policy with Pennsylvania’s Department of Labor and Industry says that the program is instrumental for retaining talent.

“For anyone who has ever been an employer or perhaps even worked in a management position for an employer, you know how much cost and time it takes to have high turnover,” she said.

To participate in either the Pennsylvania or New Jersey programs, companies generally need to have been in business for at least three years and to have reported wages to the state for the past 12 quarters, among other eligibility requirements. Employers must apply to their specific state and submit the Social Security numbers, normal hours worked per week, and the proposed reduced hours per week for the employees in an affected unit — like a team or division or department. Approvals usually take about two to three weeks. New hires into the group aren’t allowed and changing hours generally requires an employer to reapply. Employers do all the reporting and are only required to report the wages that they’re paying, which is a bonus for employees.

“An employee can work part-time for another employer while in our shared-work plan and they don’t need to make disclosures about the money they earn separately,” said Dickinson. “Their shared-work benefits would not be affected by having another job, but employees must be able to work during the normal work hours of the shared-work employer.”

NewAge Industries, a Southampton-based manufacturer, has used the program “several times over the past few years,” according to Eileen Smith, a human resources representative.

“Thanks to the program we did not have to conduct layoffs to employees and they were able to keep their medical benefits, and the employees were able to collect unemployment pay for the hours not worked,” said Smith. “Once production picked up again, we didn’t have to worry about finding and hiring new employees so there were no delays in production with having to train new employees.”

Employers must use this program for a designated group of employees, and do not have to include their entire workforce. All of the employees must be part of the same “affected unit” with corporate officers being excluded. A shared work plan can last up to 52 weeks and employers can end it at any time. Benefits have to be equal so everyone in the same plan has the same cut in hours. Regular benefits — like paid time off — are not affected. For Dickinson, however, one of the biggest benefits is maintaining morale.

“Morale is a huge issue,” Dickinson said. “It not only affects those who are laid off but their coworkers too. This program is really helpful to keep your team working together in a way rather than coldly cutting off some people while you keep only the people you need.”