Workshare Unemployment Benefits

A 10x Phase 2 Investigation

Project Overview

18F is a digital service team within the General Services Administration made up of federal employees. The 18F team is currently investigating opportunities, challenges and barriers to entry around the state-led delivery of a federally-funded unemployment benefit program called short-time compensation, or “workshare.”

This phase 2 project is funded by the 10x program with CARES Act funds. Workshare, or Short-time Compensation, is a program funded by the Department of Labor’s Employment & Training Administration, and provides an alternative to layoffs for employers and employees.

Short-time Compensation

Short-time compensation (STC), also referred to as “work share” or “shared work” programs, are active in 26 states. STC is a form of unemployment insurance (UI) that gives employers the option of reducing employees’ hours instead of cutting their workforce during a business slowdown.

For example, a business may come to a difficult decision that it needs to reduce personnel costs by laying off five employees until business improves. Under work sharing, the employer could instead reduce the hours of 25 employees by 20 percent, and those workers would receive a prorated UI payment for their one day per week of unemployment, while maintaining any existing health and retirement benefits. By opting for work-sharing, the business is able to operate during a downturn without losing valued employees and is better positioned to ramp back up when economic conditions improve.

With 11.1% of the United States population – or 17.8 million people – currently unemployed, (a 12 million increase since February) the need for STC to help ease the burden of the COVID-19 pandemic on employers and employees has never been higher³. Unfortunately, state workers are overwhelmed by the volume of UI and STC claims and necessary manual reviews and workflow. The use of STC has historically been relatively low (at its peak in 2010, the ratio of STC beneficiaries to regular unemployment compensation beneficiaries was 3%⁴) due lack of awareness of the program, administrative complexity for employers, and employer costs. This project intends to dig in on these processes and experiences to find opportunities for improvement.

2020 CARES Act Funding for STC

Under the CARES Act, Congress approved additional short-time compensation benefits for state governments. The full legislation can be read here https://www.congress.gov/116/bills/hr748/BILLS-116hr748enr.pdf

Highlights include:

Implementation Assistance Grants $100 million in grants to help states in implementing and administering STC programs² for three years.
Federal reimbursement for STC payments The CARES Act provides federal funding for 100% of STC paid by states with programs already in place¹

History of STC

Work sharing has a decades-long history in the United States. For example, in the early 1930s, President Hoover encouraged employers to reduce employees’ hours instead of laying them off. In 1932, the President’s Organization on Unemployment Relief issued a report that concluded, “Reduction in the working time is the principal method of spreading employment” through such means as reduced days per week, reduced hours per day, or rotating time off.

New York was the first state to consider STC legislation, in 1975, as part of a broader employment policy bill. The legislation died in committee.

In 1978, California became the first state to enact an STC law.

The federal government introduced a temporary, national STC program in 1982 with the Tax Equity and Fiscal Responsibility Act (TEFRA; P.L. 97-248), which expired in 1985. The U.S. DOL did not curtail the program’s operation in existing states, nor did it stop new states from adopting the program. The recession of 1990-1991 brought renewed attention to STC, leading Congress to enact permanent STC legislation, the Unemployment Compensation Amendments of 1992 (UCA; P.L. 102-318). However, at the time, government officials argued that the 1992 law was restrictive in application and would have put many existing state STC programs out of compliance and required clarification.

Congress passed federal legislation in 2012 – Middle Class Tax Relief and Job Creation Act (UCA, P.L. 112-96) – that set national program standards and offered federal grants to states for implementing new programs, improving the operational efficiency of existing programs, and promoting enrollment and marketing of STC to employers and workers.

The CARES Act, Section 2108, allows for states with STC programs in place to receive 100% reimbursement of STC payments and 50% federal financing for states that set up STC, available through December 31, 2020. Section 2110 allows $100 million in grants to states, 1/3 for the purpose of implementation or improved administration of such programs and 2/3 for promotion and enrollment; requests must be submitted by December 31, 2020⁵.

Benefits of STC

Employer benefits

Retain their current, skilled workforce while reducing hours and wages.
Eliminate the time and expense of recruiting and training new employees when business needs increase.
Improve morale; even employees who survive a layoff may be vulnerable to “survivor’s guilt” and emotional contagion (picking up on the despair of laid-off employees) that can reduce productivity⁶.

Employee benefits

Avoid the hardship of full unemployment and being permanently laid off.
Retain connection with their current employer and remain ready when times and business gets better.
Not required to look for other work.
Do not need to train for a new job.
Earn a portion of their regular wages while receiving a portion of UI benefits to replace the portion of their wages lost (generally, employees will make more with STC than with only UI).
Maintain health and retirement benefits.

State benefits

Reduce unemployment rates.
CARES Act federal funding for STC payments and grants to help implement and administer STC programs.

Economic benefits

Saves jobs; more than 500,000 in the U.S. from 2008-2013⁷.
Keeps employment stable to avoid financial crises⁸.

“The benefits are enormous. We preserve valued employee talent and experience, while workers maintain fringe benefits and employment status with a minor differential in pay in the form of pro-rated unemployment insurance. We did not lay off a single worker during the downturn and ramped back up easily when business returned to its former levels. In addition, there has been a tremendous payoff in employee morale that comes from committing to the company’s workforce during tough times. And, of course, having fully trained workers when the business cycle turns up really does translate into a competitive advantage⁹.”

Opportunity areas to explore

Currently, 27 states have STC programs established in law that meet the new federal definition with 26 having operational programs¹⁰. Other states, and their workforce, would benefit from having STC laws passed.
Administration of these programs is time-consuming for state employees and employers who, oftentimes, rely on paper processes.
Most states are trying to heavily-modify COTS software to administer STC, which can lead to high expense, long implementation timelines, and vendor lock-in.
Awareness of these programs is relatively low and there is federal grant funding available through CARES Act to help improve their awareness/usage.

Project goals

Priority	Goal	We know we’ve succeeded when...
1	Document current state of Workshare delivery and identify areas for improvement to drive awareness or administrate STC.	(A) Journeymap and/or process map with employer, employee, and/or state employee experiences. (B) Identified area that would benefit from prototyping. (C) Technology and STC legislation audit of current systems and market saturation.
1	Identify 1-2 state partners for prototyping.	Partnership in place.
2	Develop and test prototype.	Validate / test prototype with end-user(s).
3	If applicable, defined path for continuing work.	(A) 10x Phase III funding request. (B) Lessons learned documented.

Timeline

Weeks

1	2	3	4	5	6	7	8	9	10
Ramp up	Initial exploration	Desk research and line up interviews	Interviews & Partner development	Interviews & Partner development	Synthesis	Prototyping	Prototyping	Reflection and final deliverables	Wrap up