Short-Time Compensation: A Win for Employees and Employers

by Eric Seleznow on November 14, 2013 · 1 comment

As we put in place policies that will continue to help grow our economy, we also want to make sure that businesses have the tools they need to weather any future difficult economic times.

That’s why President Obama signed the Middle Class Tax Relief and Job Creation Act of 2012.  Along with extending tax cuts for the middle class, this law included the first substantial set of reforms to the Unemployment Insurance system in nearly 40 years − with an emphasis on re-employment. One key reform is federal support for expanding short-time compensation programs, also known as “work sharing.”


Secretary Thomas E. Perez explains short-time compensation in this short video.

Short-time compensation allows employers to reduce work hours for a group of employees as an alternative to layoffs during tough economic times. Those affected by reduced hours can have their lowered wages supplemented by a percentage of the weekly unemployment compensation available to them. This is a win-win: Employees get to keep their jobs – and benefits – while employers get to maintain their skilled workforce and avoid the hassle of re-hiring and re-training new workers when business activity picks back up. It’s also good for local economies, which tend to feel the impact of layoffs.

Right now, 28 states have STC laws on the books, but we want to encourage more to take the steps needed to establish this common-sense program. To make it even easier, today we published new online resources including guidance and model legislation for states interested in developing an STC program. There are also best practices, business outreach ideas, and stories from employers and employees who have benefited from an STC program.

The Middle Class Tax Relief and Job Creation Act of 2012 also put in place federal financial incentives − available for a limited time – to encourage the states to implement or improve an STC program, promote the program to the local business community and encourage employees to enroll. Before applying for these grants, states must have conforming STC laws in place and grant applications must be received by Dec. 31, 2014. In addition, we’re able to offer federal reimbursement of the benefits paid through August 2015, and a voluntary temporary federal program for those states looking to see if STC can work for them.

Learn more about STC and how states can take advantage of federal financial incentives today!

Eric Seleznow is the acting assistant secretary of labor for employment and training.

{ 1 comment… read it below or add one }

1 Jack Renner November 17, 2013 at 3:51 pm

Unemployment compensation is controversial; I think most people would agree it should be used as little as possible, preferably due to a growing economy. When the economy is struggling, layoffs hurt all parties and increase the number of people seeking and receiving unemployment benefits. Short-time compensation seems like a common sense way to allow workers to keep their jobs while allowing companies to decrease wage hours if needed. Decreasing hours for workers is obviously not ideal, but the unemployment compensation they collect are much less than the federal unemployment benefits they would otherwise have collected if fully laid-off. Employers should benefit because they can retain their work force through tough economic times while saving money. The benefit to the companies seems evident based off of the number of businesses participating; if they did not see a positive result they would simply lay employees off completely. More states should pass Short-time Compensation legislation to give businesses this option.

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