Deciding to restructure your workforce is never easy. There are a lot of critical decisions that need to be made and one that can be overlooked is the impact of unemployment on your organization and the workforce that is being affected. The unemployment impact may not be the driving factor in your decision, but it is important to know what obligations you have when conducting a layoff and what resources are available for the impacted employees.
Work Share Programs
There may be alternatives to a layoff that can be considered. For example, did you know that you can create a Work Share program in some states that allow you to cut the hours of a group of employees and allow them to make up some of their lost wages through unemployment? This may be an option for employers who think the downturn may be temporary. Not all states have workshare programs, but this can be an alternative to help retain your employees in a competitive market.
Partial Unemployment Benefits
Many states will allow employees whose hours have been cut to collect partial unemployment benefits. Unlike Work Share programs, any employee may qualify for partial benefits if their earnings are less than their weekly benefit amount for unemployment. The partial program will not make up for the lost wages but can replace a portion of the lost income.
State Separation Notices
In a number of states, you, the employer, have an obligation to provide any employee who is leaving your employment, regardless of the reason, with a notification about the availability of unemployment benefits. Some states provide a flyer or poster with this information and others require that information specific to the employee be included in the notification. These notifications are time sensitive and, in some states, can carry a penalty or loss of rights, if they are not provided.
Federal and State WARN ACT Notices
Another obligation that employers face is compliance with the Worker Adjustment and Retraining Notification (WARN) Act that requires employers with over 100 employees to provide notification 60 days in advance of a plant closing or mass layoff. In addition, some states may have enacted a mini-WARN or other state specific provision that must be followed when a layoff is going to occur.
Severance Pay Implications
Some employers may elect to provide their impacted employees with some type of severance or separation pay in addition to paying out unused vacation or sick pay. This additional pay while appreciated, may have an impact on the employee’s eligibility to collect unemployment benefits.
How to File for UI Benefits
Layoffs are hard on everyone and many employers may want to include information on applying for benefits as a part of their workforce reduction plans.. Many employees may have never filed for unemployment before and may not know where to begin. As an employer, trying to compile a list of state UI websites and phone numbers is a big task. In addition, each state has their own set of requirements for the amount and duration of benefits, if there is a waiting week, work search requirements, etc. that add to the complexity of providing employees with the information they need.
State Unemployment Tax Rates
Any reductions in a workforce will likely initiate unemployment benefit charges to an employer’s state unemployment tax account, and potentially create increases in future tax rates. The potential charges to an employer’s account will be based on the claim liability of the individuals being laid off and the duration of the layoff. In addition, most tax rates are generally in effect for a calendar year, while the rates are typically calculated using figures from a July through June fiscal year period. Oftentimes, tax rate increases can be deferred based simply on the timing of a workforce reduction. It is important to know and understand each state’s tax rate calculation method and formula for budgeting purposes and to project the financial impact of workforce reductions on future tax rates.
Thomas & Company knows that employers have a lot of questions when they are forced to reduce their workforce and we want to help.
We have put together a comprehensive workforce reduction guide to help navigate the questions you may have around unemployment related issues. This state-by-state guide provides the latest information on UI benefits and the compliance requirements for the impacted employees. To have the guide delivered directly to your inbox, please complete this form.