Is the U.S. economy trending toward recession? Rumors of a recession are circulating. Many companies are considering, or have already implemented, plans to reduce overall headcount. Inflation fears and rising interest rates are also driving concerns about a recession. Regardless of whether the United States enters into a recession, as formally defined by a broad set of indicators, layoffs remain a part of the economic cycle. Employers may be able to alleviate some of the stress and burden associated with economic downturns by working with state unemployment agencies. State unemployment agencies have created workshare plans to provide a soft landing for employers and employees at the bottom of an economic cycle.

Workshare plans allow employers to enter into agreements with state unemployment agencies to reduce employee hours without laying off employees or disqualifying them from state unemployment compensation benefits to supplement their reduced wages. Approximately half of U.S. states have workshare or shared-work plans.

This arrangement effectively allows employers to take a tempered approach to layoffs and add another option to their responses to economic downturns. This approach may result in a number of benefits for employers. Below are some of the advantages of utilizing a workshare program.

Employee Retention

Employers that use workshare programs may find that they have an easier time retaining employees during the economic downturn.

Employers may find that employees who receive pay from their employers while working a reduced schedule, but who also receive unemployment benefits, may decide to refrain from looking for a new job. Generally speaking, while the employee may realize a small decrease in salary under the workshare program scenario, the employee may feel reassured that the employer is putting forth effort to retain the employee by providing as many hours and as much pay as possible during a slower economic period.

To qualify for the receipt of benefits, unemployment compensation recipients generally must show that they are actively searching for jobs similar to the ones they recently lost. Typically, they must show proof of job searches each week. Workshare programs remove this requirement or limit the requirement to seeking supplemental employment instead of full-time employment. Thus, one benefit of Workshare programs is that they ease the employee’s burden of seeking full-time employment in order to receive benefits. Additionally, the employee may be less likely to look for a job because he or she does not have the same job-search obligation that is typically required of unemployment compensation recipients.

Contribution Rate Protection

Unemployment contribution rates are generally calculated by comparing how much an employer contributes to a state unemployment compensation system versus the benefit claims submitted against the employer’s account by former employees. Workshare programs reduce the unemployment compensation benefits due to current employees working on reduced schedules. The employer retains a degree of control over the amount the employees can claim by determining how much work is available during an economic slowdown. An employer considering a workshare program may want to perform a calculation based on the states where the employer has employees to determine the potential impact to the employer’s contribution rate before entering into a workshare program.

Employees in workshare arrangements may also be less likely to be long-term recipients of unemployment compensation benefits. Discharged employees may not readily find other jobs, so they may be charging benefits against their former employers’ accounts for considerable amounts of time, perhaps even after an economic slowdown has concluded. Employers with workshare arrangements may be able to prevent employees from joining the ranks of the long-term unemployed by ensuring that they continue working through an economic slowdown and are available for full-time employment at the conclusion of the slowdown.

Employment Benefits

Employers with workshare arrangements may continue to provide benefits to employees with reduced work schedules, whereas they would not provide the same benefits to former employees. Reduced-hour employees may retain access to health insurance, seniority status, paid leave, and retirement plan participation. The maintenance of their employment benefits may cause some employees to stay loyal to an employer, especially when the employer continues to provide benefits through an economic slowdown.

Reduced Administrative Burden

Employers may need to take administrative action to enter into workshare agreements with their respective state labor agencies, but they may manage all employees involved in a workshare program collectively. Conversely, an employer that lays off a significant employee population without utilizing a workshare agreement would run the risk of having to manage the separate unemployment claims of individual employees. Managing unemployment claims can be a significant administrative burden for employers that may be mitigated by workshare arrangements.

Key Employer Considerations

Employers may want to consider adding workshare arrangements to their repertoire of unemployment management options. Workshare programs potentially can help employers maintain better employee relations while retaining talent that may not be easily replaced. In addition, employers, employees, and state labor agencies alike may benefit from workshare programs that may reduce unemployment and facilitate continued employment.