Unemployment Insurance expanded to include Work Sharing

Governor Snyder has signed a work-sharing bill that gives qualifying employers an important tool for avoiding layoffs. Rather than laying off some employees entirely, the employer reduces hours for a group of employees for a specified length of time and Unemployment Insurance benefits make up part of the employees’ lost wages. This will go into effect Jan. 1, 2013, and has a five-year sunset.

The League has published a fact sheet, Work Sharing: A Win-Win Solution for Workers and Employers that explains the new policy. As noted in the fact sheet, workers benefit from work sharing because they will have less disruption in their household income than if they are laid off. Employers benefit from work sharing because it enables them to keep their skilled workers rather than having to search for, hire and train new workers when business improves. Overall, Michigan benefits when there are fewer layoffs and less risk of some workers becoming long-term unemployed.

While this is a positive development, there still is work to be done. As a League report explained last November, Michigan’s UI program still falls short in many ways, most notably in that it only provides benefits for a maximum of 20 weeks. The new work-sharing program will not be able to help those who are laid off entirely and are unable to find work after 20 weeks of job search. But it may prevent some others from getting into that situation and is definitely a good step for Michigan.

Workers benefit from work sharing because they will have less disruption in their household income than if they were laid off. While UI benefits never replace 100% of lost wages, the wage loss is lower for workers with reduced payroll hours than for those with no payroll hours at all. For some workers, it will mean not getting laid off; for others, it will mean “sharing the sacrifice” through a reduced income so that their co-workers will not be laid off. Workers also benefit because they can continue receiving health insurance and other benefits without disruption (this is a requirement of the law). Participating in work sharing does not count against a worker’s available weeks of Unemployment Insurance, nor is the employee required to participate in job search activities (since it is expected that the employee will in the future be working full time again for the employer).

Employers benefit from work sharing because it enables them to keep their skilled workers rather than having to search for, hire and train new workers when business improves. This reduces unpredictability, administrative costs and training costs. It can also help maintain positive morale in the workplace, as workers are likely to prefer spreading the sacrifice around rather than fearing the loss of their jobs entirely.