States use Work Share to limit layoffs
Older employee works with younger employee.
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Bob Moon: It's got to be tough being a boss these days, delivering the grim news with so many pink slips. But as strange as it sounds, that might be the easiest part of riding out a recession. The real challenge comes in not cutting too deeply and then, trying to anticipate just the right time to gear back up.
Some 20 states are giving employers a less disruptive option aimed at limiting their layoffs up front: Enrolled companies cut work hours, but the state picks up some of the difference with unemployment benefits.
Cathy Duchamp has this profile of a Maryland company that's sharing the economic burden with a program called Work Share.
Cathy Duchamp: We're on the factory floor of the Independent Can Company. Workers here make decorative tins that hold everything from Hershey's Chocolate to Zippo Lighter Fluid. The pounding presses give you the sense that business is good.
Not so, says human resources manager Dan Daniels. Orders are way down. The second-shift has been cancelled. Daniels recalls last spring, when permanent layoffs became a possibility for the first time in the company's 80-year history.
Dan Daniels: You don't really like letting people go, because it's your trained workforce. Because let's say in six or seven months, we need these people back, they may or may not be available. And if not, we're starting from scratch, again. It's about a seven-month process to teach somebody how to run one of our can lines.
So, how do keep skilled workers, and at the same time, cut payroll? The answer for Independent Can, was Work Share.
Here's how it works: Companies that enroll in Work Share can shave a five-day work week to three. Employers pay for the hours worked. Employees collect unemployment benefits based on the percent of hours cut. It's less money.
But that's OK with Sandy Irey. The HR coordinator at Independent Can went down from five days a week to four.
Sandy Irey: I love it, I really do. Last week on my day off, I was running errands and the lady at the counter in the card shop apologized for keeping me waiting and I said, "That's okay, I'm not in a hurry." And I thought, "How refreshing."
Irey is the first to admit it's a different story for many workers on the factory floor, who need all the money they can get. But manager Dan Daniels says Work Share has helped to keep morale up.
Daniels: I do think it gives people a sense that we're all in this together and I'm not being singled out and laid off: "What did I do to get laid off involuntarily?"
California was the first state to offer Work Share, back in 1978. Seventeen other states have followed, including Maryland. But in the current recession, Work Share enrollment is way up. In Maryland, the increase is ten-fold.
Tom Wendel: Right now, unfortunately for us, business is good, and that's usually not good for everybody else.
That's Tom Wendel. He runs the Maryland state unemployment program. Wendel says Work Share is a good way for companies to get through a slump. But he worries about the strain the recession is putting on the trust fund that pays out unemployment benefits.
Wendel: Maryland has a little bit over $500 million in a trust fund right now. So, we're looking relatively good compared to a lot of states, but money goes quickly. We're paying out almost $35 million a week right now.
Work Share is only a small part of that payout. In fact, Wendel says only a fraction of companies eligible for Work Share sign onto the program. And Work Share can't always prevent layoffs. At Independent Can, 21 people -- about 9 percent of the company's workforce -- were told last month they no longer had jobs.
In Belcamp, Md., I'm Cathy Duchamp, for Marketplace Money.