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Workshare Programs Help Businesses Weather a Socially Distanced Economy

By Zach Herman | Oct. 15, 2020 | State Legislatures Magazine

As states continue to reopen their economies, they are working hard to protect workers. This means using social distancing to limit opportunities for workers to be exposed to COVID-19. But the reduced capacity created by social distancing often means less income for businesses, which have less money to pay staff and less need for staff to operate. In April, the District of Columbia adopted a program that could help businesses survive a reopening economy by letting employees work reduced hours and still receive a portion of their typical pay.

Known as short-time compensation (STC) or workshare, the programs operate as part of a state’s or local government’s general unemployment compensation system and can prevent layoffs during economic downturns. The district became the 26th state or territory to adopt STC since 2012.

The reduced capacity created by social distancing often means less income for businesses.

To take advantage of workshare, business owners apply to their state’s unemployment program. If approved, they can then cut employees’ work hours by between 10% and 60%. Employees receive paychecks based on their reduced hours and a prorated portion of their lost wages in the form of unemployment. Workshare provides an alternative to layoffs by allowing businesses to reduce costs by cutting hours instead of employees. Employers also get to keep their staffs and avoid the cost of losing, rehiring and retraining employees.

As businesses reopen they are encountering significant decreases in consumer spending and requirements to operate at limited capacity, constraints that leave them struggling to pay their staffs at pre-pandemic levels.

The District of Columbia expanded its new workshare program to make it even more effective at helping struggling businesses avoid layoffs. Businesses can now apply for workshare before they reopen, allowing them to restart at reduced staffing levels. Under normal circumstances, workshare policies don’t take effect until a business reopens at full capacity and is accepted into the program. This can be a risky move for many businesses that would still have to pay normal staffing costs while awaiting approval for workshare. The district’s expansion helps mitigate some of the risks businesses are experiencing.

The CARES Act created some supplemental funding for workshare programs. States and localities with existing statuary workshare programs will receive 100% of funding related to their workshare programs from the federal government; states that institute programs substantially similar to workshare will receive 50% funding. Both funding opportunities expire Dec. 31. The CARES Act also lets states apply for grants to establish workshare programs, if created this year.

Twenty-six states currently have workshare programs.

Zach Herman is a policy associate in NCSL’s Employment, Labor and Retirement Program.

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