A Comprehensive Guide To Short-Time Compensation Programs
In response to the Coronavirus pandemic, the federal government has passed the New Coronavirus Aid, Relief, and Economic Security (CARES) Act. This financial relief program includes several programs such as PUC, FPUC, retirement plan provisions, and funding for Short-Time Compensation (STC) programs.
What Is A Short-Time Compensation Program?
Short-Time Compensation, also known as shared-work program or work sharing, is an alternative to layoffs for employers whose available work has reduced. It allows employers to reduce working hours of employees instead of laying-off some employees. This program protects employers’ trained workforce and employees’ jobs during times of lowered economic activity.
For instance, an employer might reduce his/her employees’ working hours by 10% instead of laying off 10% of his/her full-time workforce.
STC or shared-work programs are administered by state governments. The requirements may vary with states but they must meet certain federal requirements to receive funding for the programs. This includes:
- The reduction in number of hours worked must be in lieu of layoffs
- Employers must report the estimated number of layoffs that would have occurred in the absence of STC program
- The amount of UC payable must be in a prorated portion of what the employee would be receiving if he/she did not participate in the program
- Employers who offer health, retirement, or other benefits must certify that participating employees are still continuing to receive the benefits even after their work hours has been reduced
Who Can Qualify For An STC Program?
To be eligible for an STC program, employers must have an approved STC plan with an appropriate state agency. The STC application process is initiated by employers.
To qualify for a shared-work program, employees must be determined to qualify for UC benefits. While receiving benefits under an STC plan, employees need not meet work search or availability requirements, but must be available for their normal workweek. If the state requires, the employees should also serve “waiting week,” a non-paid week.
Does The Short-Time Compensation Program Help Employees?
The STC program not only helps employers but employees as well. That is, those employees who have experienced a reduction in working hours and lost a portion of wages can collect a percentage of unemployment compensation (UC) benefits.
Unemployment benefits generally replace half of an average employee’s wages. If an employee has experienced a 10% reduction in working hours, UC benefits would account to 5% of the employer’s wages before the working hours were reduced. Employees would therefore receive a combined income of 95%,i.e., 90% as wages plus 5% as STC.
Which States Have A Short-Time Compensation Program?
27 states have STC programs that meet the federal definition under Code Section 3306(v), and 26 among them have operational programs. The states that offer STC programs include:
- New Hampshire
- New Jersey
- New York
- Rhode Island
With extra funding available for STC programs under the CARES Act, it is expected that more states will implement these programs.
Where Can You Apply For STC Programs?
You can apply for STC programs through your state’s Unemployment Insurance agency. But before applying you must draw up a plan which must include:
- How many working hours will be reduced?
- How many employees will be affected due to reduced hours?
- How will the employees be notified about the reduced work hours?
It should also include:
- A statement that benefits will be provided to employees even after reducing work hours
- An estimate of the number of employees who would be laid off if a STC program is not implemented
- Certification that affected employees can take part in training to upgrade their job skills during the shared-work program
Details Required While Applying For STC Program
You have to provide several information while applying for a shared-work program. They include:
- Your company’s name, telephone number, address, fax number, and contact details for an authorized representative
- Names and social security numbers of employees who are affected due to reduced work hours
- Your tax account number
Is An STC Benefit Taxable Income?
Yes, an STC benefit is taxable income. Individuals who have received STC benefits should fill a Form 1099-G from the state where they have filed a claim, to show the amount received.
STC programs can help you not only retain trained employees but also improve the morale of your business by avoiding layoffs. For employees, these programs do not replace 100% income but can help you if your work hours are reduced. However, if you are still laid off under unfortunate circumstances, you can apply for other unemployment benefits programs like Pandemic Emergency Unemployment Compensation (PEUC) program, etc. under the CARES Act.
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