Companies And The State Team Up For A Surprising Payroll Plan
July 26, 2009 | By Lisa Ecklebecker | Worcester Telegram | Link to article
When business started slowing late last year at Ken-Weld Co. Inc., the manufacturer faced the prospect of laying off workers.
Instead, it turned to a state program called WorkSharing that allowed it to cut workers' hours and pay while the workers made up some of their lost wages with partial unemployment benefits.
Available in 17 states, work sharing has forced the company to juggle a new schedule, but it has also kept workers from fleeing to other employers while Ken-Weld, which employs about 30, waits for its customers to place orders.
"In our mind, the worst thing that could happen is things turn around and we don't have the people, which is what we could have if we lay some of these people off," said Michael P. Burke, general manager of the privately held business.
Work sharing, sometimes also known as short-time compensation, has long been used in Europe. California established a work sharing program in 1978. A temporary national program began in 1982, followed by permanent changes to federal laws in 1992 that allow work sharing, according to the Center for Law and Social Policy, a nonprofit organization focused on the poor.
Massachusetts passed work sharing legislation in 1988, but its use has soared in the past year. A total of 510 companies and 10,893 workers were participating as of last week, up about 15 times from a year ago, according to the state Executive Office of Labor and Workforce Development.
Employers, ranging from retailers to insurance agencies to pharmaceutical companies, are using work sharing, said Suzanne M. Bump, secretary of the Executive Office of Labor and Workforce Development.
"There were certain industries that were familiar with the program already because they regularly go through expansions and contractions of their labor forces. For instance, manufacturers have been utilizing work share since its inception," Ms. Bump said. Now "there certainly is a much broader audience for it than in years past."
Under work sharing, workers collect a percentage of unemployment insurance benefits that equals the reduction in their wages and hours. If a company cuts workers' hours by 20 percent, workers can receive 20 percent of their unemployment benefits, according to the state. Employers must continue regular health insurance benefits.
Workers take home less pay than under full-time work, but the partial unemployment insurance benefits cushion the blow, according to work sharing proponents.
"It shrinks the gap enough," said Mr. Burke, although he added, "It's never easy when you get your pay cut."
Payments to workers come from the state's unemployment insurance trust fund, which contained about $1 billion as of May 31 and is mostly funded by employers. The average amount of money paid out of the trust fund weekly for work sharing benefits has been ranging from about $400,000 to $500,000, according to the state.
Work sharing is particularly useful in industries that rely on skilled or aging workers who might leave the state, retire or leave the work force if laid off, said Andre Mayer, senior vice president of communications and research for the Associated Industries of Massachusetts, an employers' trade group.
"This is a state where we have a perennial shortage of skilled labor, people who know how to get a job done," Mr. Mayer said. "Even in this situation, which is a terrible employment market, we hear some of our members saying they can't find people to fill certain positions."
Ken-Weld feared that if it laid off workers, some of whom are master welders certified to work on a variety of specialized metals, it might lose them to competitors or be unable to replace them when customers wary of the economy and pressed by the credit crunch again place orders, according to Mr. Burke, the general manager. The company makes custom-welded products for industrial customers, including large metal chambers, pressurized tanks and, increasingly, components for structures.
"You don't want to just let that go," Mr. Burke said of the skills the Ken-Weld employees possess. "When they're 15-, 25-year veterans, if you will, there's not a lot of guys walking around like that."
After Controller Jo-Ann J. Judkins stumbled upon online information about work sharing, Ken-Weld opted to cut all employees' hours or salaries by 20 percent and enroll everyone in the program. Hourly workers dropped from five-day to four-day schedules starting in February. Ken-Weld overlapped the schedules to make sure the site is staffed Monday through Friday.
Edward Steiger of Webster, a 31-year Ken-Weld employee, said that with his children grown, he and his wife can adapt to work sharing. He said he is enjoying extra time in his garden and appreciates that benefits remain in place.
"We still have the benefits. We need to get the benefits," Mr. Steiger said. Also, he added, "I hate to get laid off and called back."
Companies can use work sharing in Massachusetts for an initial period up to 26 weeks and then apply for up to an additional 23 weeks of benefits. But the program is not meant to support businesses for long.
"Once you get past a year of this, we really work with the company to determine whether another round would be appropriate," Ms. Bump said, "because we don't want this to become a permanent part of someone's business model, and we really have to help them look carefully at the viability of their company."
Copyright 2009 Worcester Telegram & Gazette Corp.