Total Tax
October 2009
COST-CUTTING AND LABOR SAVING PROGRAMS
Difficult economic times call for creative ways to keep businesses afloat by retaining as many employees as possible while still cutting costs. Currently, employers are participating in a number of different programs that are designed to accomplish just that. Most of the programs involve making difficult decisions that will impact the employer as well as the employees. Here is a high level overview of some options.
Furlough
In the past, the word “furlough” referred to time off based on a company-planned schedule. For example, a company’s workforce might be divided into groups where each group takes a weeklong furlough without pay while the other groups work. These types of furloughs were considered voluntary since they were pre-planned and the employees were aware of the furlough at the time of hire. Some furloughs were even part of union agreements.
In today’s world, a furlough is often more like a temporary layoff due to economic conditions. Historically, industries such as manufacturing, retail, and airlines have used furloughs in this manner. However, today, a growing number of other business sectors including colleges and state governments are choosing the option to furlough their employees in order to reduce operating costs. Furloughs have become a way to cut costs without having to cut jobs. Employers can address short-term cost issues without putting in jeopardy the long-term health of the company. If employers can hold on to their employees through furlough programs, they can save on the high cost of recruiting, hiring, and training new employees when business picks up.
Although furloughs can be a good way for employers to save on labor dollars, the decision to furlough should be reviewed carefully. The employer must determine if the savings in labor dollars will be greater than the cost of having their unemployment tax rate increase. An employee who has been furloughed may be eligible for unemployment benefits. Employers should also consider whether choosing to furlough their employees might result in decreased production, customer satisfaction, or revenue depending on what groups of employees are placed on furlough.
Work Sharing
Another cost-saving program on the rise is work sharing, also known as job sharing. Under work sharing, an employer may choose to avoid layoffs by reducing the number of regularly-scheduled work hours for all workers or a particular group of workers. The reduction in hours through work sharing may be significant enough to allow workers who are employed for a portion of the week to collect unemployment insurance benefits. Work sharing considers the hours of work an employee completes in a given period to determine benefits, which differs from the Partial Unemployment program that considers an employee’s earnings. In a work sharing agreement, workers are not required to meet a state’s regular availability for work, actively seeking work, or refusal of work requirements. Under a work sharing program, workers are required to remain available for a regularly-scheduled work week. It should be noted that not all states have work share programs and that the employer must register for those programs and keep detailed records of the participating employees.
Pay Cuts
Many employers have opted for a different option—across-the-board pay cuts. When employees see that they are in the same boat as their co-workers, they can feel that everyone is sharing the same burden and may be less likely to seek other work. The employer also maintains a full staff in order to keep up with production or to keep normal business hours for client-facing positions.
Cost-Cutting and Labor Savings Program
Depending on the size of the pay cut, an employer can protect its unemployment tax rate since the reduction in pay might not be severe enough to allow the worker to qualify for partial unemployment benefits. When planning furloughs, work sharing, pay cuts, or other cost-cutting and labor saving programs, it is important to consider equality across departments and job groups that are affected. Doing so will reduce resentment between co-workers or the likelihood of an employee alleging unfair treatment. No matter what program an employer chooses to implement, many individuals will be negatively impacted. It is important to keep in mind that these tough decisions will help the company stay in business, and employees to remain employed.
New Hampshire
On August 17, 2009, New Hampshire Employment Security (NHES) implemented a new online system for employers to manage their unemployment insurance accounts and view information via the Internet. The agency’s new system can be accessed at https://nhuis.nh.gov/employer/. Prior to implementation, all employers registered with NHES received an agency notice providing an employer registration code. This code is used to access the new system. If a notice was not received, employers may call NHES at 603- 656-6651 for assistance.
ADP Unemployment Compensation Services (UCS) handles employers’ unemployment claims processing, including monitoring benefit charges and tax rates. Therefore, we request that ADP UCS clients do not make any changes to their account information online. Altering account information such as mailing address or third party administrator (TPA) designation could result in a delay in receiving unemployment notices and missed agency deadlines. Please contact your UCS Client Services Representative with any questions.
Emergency/Extended Unemployment Benefits Update During this time of high unemployment, many states have extended benefits (EB) available to claimants who have exhausted regular state benefits as well as Emergency Unemployment Compensation (EUC). Extended benefits are 100% federally funded through the end of 2009, but will return to being 50% employer funded next year. The unemployment rate has remained at the required level for three consecutive months triggering extended benefits in the following states and territories:
Alabama |
District of Columbia |
Maine |
New York |
Tennessee |
Alaska |
Florida |
Massachusetts |
North Carolina |
Texas |
Arizona |
Georgia |
Michigan |
Ohio |
Vermont |
Arkansas |
Idaho |
Minnesota |
Oregon |
Virginia |
California |
Illinois |
Missouri |
Pennsylvania |
Washington |
Colorado |
Indiana |
Nevada |
Puerto Rico |
West Virginia |
Connecticut |
Kansas |
New Hampshire |
Rhode Island |
Wisconsin |
Delaware |
Kentucky |
New Jersey |
South Carolina |
|
As of the date of this publication, legislation has been introduced to extend EUC for a third time; thus providing an additional 13 weeks in states with a 9% or higher unemployment rate. If passed, a claimant could potentially receive up to 92 weeks of unemployment benefits. The following is a breakdown of those benefits:
- 26 weeks of regular state benefits
- 20 weeks of extended benefits (EB)
- 46 weeks of emergency unemployment compensation (EUC)
- 20 weeks in all states
- 13 weeks in states with 6% unemployment or higher
- Proposed 13 weeks in states with 9% unemployment or higher
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Unemployment Compensation Services Update is a quarterly update for ADP’s Total Tax clients to address the issues of employee personnel practices, state unemployment tax, and payroll tax filing matters. This publication is distributed with the understanding that the publisher is not engaged in the practice of law. If legal issues arise in the context of your business, independent legal counsel should be consulted.
Submit unemployment-related documents, including your company payroll code, company name, and contact telephone number on all correspondence to:
Automatic Data Processing, Inc., Total Tax Department, P.O. Box 6000, San Dimas, California 91773-9060
Hotline Number: (800) 959-6246
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