The Congressional Budget Office (CBO) has issued its budget and economic outlook for fiscal years 2010 through 2020. The report concludes, in part, that unemployment taxes will increase from $38 billion in 2010 to $75 billion by 2013 and continue to rise to $84 billion by 2020.

An employer’s unemployment rate is determined not only on the employer’s individual experience, but on the health of the state’s trust fund balance. As of this date 32 states (including Virgin Islands) have borrowed federal funds in order to pay unemployment benefits. A total of 12 states have borrowed in excess of $1 billion.

New Hampshire is adopting a Shared Work Program to join the other states mentioned in last week's blog Shared Work Programs.  It looks like public opinion is mixed with some worried that it will put pressure on an already over-burdened unemployment fund and others concerned that it is helping employers cheat their workforce. 

In order to qualify for these types of programs, the employer must show that work hours have been reduced, so they aren't really getting free labor as some may think.  Also, when all is said and done, the unemployment charges are charged back to the employer's unemployment account which they pay back eventually through unemployment taxes anyway. 

So, I don't believe employers see this as a way to cheat the system.  If anything, it benefits the employee, who is able to stay employed and will be better off when business turns around.  They can get back to full-time employment more quickly than folks involved in a straight layoff. 

As far as the burden on the unemployment fund goes, it should pretty much even out in the end.  If you have to cut labor in half, whether you do it by laying off full time workers or cutting everyone back to part time, the math should work out the same in the end. 

What do you all think?  Are shared work programs good for the employer, the employee or both?

Tammy Mullin

The following is part of a bulletin going out to our clients.  Since this is such a front of mind topic, I thought I'd post here as well so everyone can get an update.

Situation

With federal Unemployment Insurance (UI) extensions set to expire at the end of this month, the Senate Finance Committee introduced a legislative proposal on February 11, 2010, to reauthorize UI provisions. Included in the HIRE Act (Hiring Incentives to Restore Employment) proposal is a three month extension of federal Emergency Unemployment Compensation (EUC), Federal Additional Compensation (FAC), and federal funding of state Extended Benefits (EB). The estimated cost for these reauthorizations is $22 billion.

In addition, Senate Majority Leader Harry Reid (D-NV), has stated he will bring a smaller version of the Senate Finance Committee bill to the Senate floor on February 22, 2010.

What Employers Need to Know

The UI assistance measures originally implemented under the American Reinvestment and Recovery Act (ARRA) were extended through February 28, 2010, due to reauthorizations signed into law on December 19, 2009. A summary of UI provisions currently in effect are as follows:

Emergency Unemployment Compensation (EUC) – Persons who exhaust their 26 weeks of regular unemployment benefits may establish or augment eligibility for up to four tiers of EUC. The reauthorization does not add any additional weeks of EUC; it simply extends the date an EUC claim may be established. The program continues to be 100% federally funded from Treasury general revenue. The following table illustrates available EUC benefits.

State Extended Benefits (EB) Full Federal Funding – Normally, the funding for state EB is shared – 50% by the states and 50% by the federal government - but was temporarily changed to 100% federal funding under ARRA. The December 2009 reauthorization pushes back the expiration of full federal funding from Treasury general revenue to the end of February 2010.

Note: By law, government entities and Indian tribes are not covered under normal federally shared or temporary full funding of state EB, and will liable for any EB paid to their unemployed workers.

Federal Additional Compensation (FAC) – A $25 supplement continues to be added to all weekly UI benefits paid, be they regular, EUC or EB. The financing of FAC will continue to be 100% federally funded from Treasury general revenue.

Next Steps

The HIRE Act proposal will not change any of the core UI elements noted above. It will simply push back the expiration date to May 31, 2010.

Tammy Mullin

Shared Work Programs are voluntary employer programs intended to provide a practical and mutually beneficial alternative to layoffs when business declines. These plans enable companies to keep their skilled workforce intact, and eliminate costs associated with recruiting, hiring and training new employees.  Participating workers are able to avoid hardships associated with total unemployment.  Both are able to quickly return to full operational status, once economic conditions rebound.

In basic terms, the hours of all workers participating in an approved Shared Work Program are reduced, but lost wages are then supplemented by partial unemployment insurance (UI) benefits.  Participating workers are not subject to normal unemployment requirements regarding availability and work search; however, they must be available for their scheduled work week.

Employers interested in participating in a Shared Work Program must apply for plan approval with the state unemployment insurance agency.  Once formally approved, an employer will need to supply weekly or bi-weekly certification information on each participating worker to the agency.

Each state agency’s plan will specify:

·         Plan duration (generally 6 months to a year)

·         Range of reduced hours allowed (normally10%-40%)

·         Number of partial UI benefit weeks allowed (usually 26 or 52 weeks)

·         Amount of weekly UI benefits payable

The states listed below offer Shared Work Programs.  Details can be found on the unemployment agency websites as follows:

Tammy Mullin

We know that all states handle their own unemployment insurance programs and have their own rules and regulations regarding unemployment in a variety of categories including how much they pay for weekly benefits and who qualifies for unemployment.  But, did you ever wonder how all those differences combine to determine what it costs an employer to do business in each state from an unemployment perspective? 

Well, below is the maximum amount you could have paid in 2009 per employee in your state if you were max rated in descending order from most expensive to least expensive. 

Tammy Mullin

HR Service Matters

By: Mike Smith

Well maybe you guessed it, but I bought Seth Godin’s book; Linchpin (see my 1/26 blog).  The book’s main premise as I see it is that a new and important workplace component (the linchpin) has arrived.  The linchpins are the people that invent, lead, connect with others and generally make things happen.  While the book is intended to help the individual learn how to be a linchpin and thus become indispensable, I think we all want to cultivate these folks and have many linchpins in our organizations (and expectantly on our individual team).

As I quickly thumbed through my new read, I noticed that in one chapter Seth writes about “The Culture of Connection.”   Here I saw another insight for HR services.  Linchpins need to connect to succeed.  I believe HR can and should provide the services to help their linchpins connect inside and outside the organization.  Seth speaks about job satisfaction and offers the proposition that the key distinction between places to work is really the perceived connection between the employee and coworkers.

We have all seen the excitement in the marketplace about “we’ve got an app for that.”  Employees live in that world and I’ll bet the linchpins thrive in it.  We would do well to create an environment that enables collaboration and connecting tools for our linchpins.  I believe that getting some visibility for the people who are making a difference in our organizations will go a long way to building linchpins and keeping them too.  Do you have an app for that?

Here is a more detailed review of Linchpin if you want to know more about its content.

http://www.ratracetrap.com/the-rat-race-trap/linchpin-a-review.html

Hire Now Tax Cut Act of 2010

Once again we are seeing congress take an active role in stimulating job growth and getting Americans back to work.  The Hire Now Tax Cut Act of 2010 was introduced February 3, 2010, by Utah Senator Orrin Hatch.  The bill will allow an employer to hire unemployed workers and not pay the employer’s share (6.2%) of the Social Security payroll tax for the remainder of 2010.  The payroll tax incentive would provide an immediate impact to hire employees now rather than waiting until 2011 for a tax credit. 

An additional incentive of $1,000 is available if the employer keeps the qualified employer on the payroll for a continuous 52 weeks.  If a worker is eligible for the Work Opportunity Tax Credit (WOTC), the employers must select one benefit or the other for 2010.

 “This is an affordable, effective and targeted proposal to get the American people back to work,” said Hatch.  “As a conservative, I appreciate that this proposal isn’t about more and more government spending; it’s about tax relief to get employers hiring again, which is exactly what millions of unemployed Americans most desperately need.”

The devil is always in the details and there are many to iron out as this bill works it way through Congress.  We will face similar issues that we had with the new WOTC stimulus categories this year, such as how will employers verify that an individual was unemployed.  There are also concerns by many that the slow economic recovery will not lead to higher payrolls in 2010 than in 2009.

Angela Lockman

Even while forced to layoff part of their workforce thereby reducing capacity, employers continue to foot the bill for rising unemployment costs.  They not only fund benefits for their own displaced workers, but also for workers of companies that have gone out of business.  On top of all of that, employment litigation rises during times of increased unemployment increasing the burden further on the employer. 

Employers need to properly prepare for a layoff situation paying particular attention to the selection criteria for individuals involved (see also TALX Blog "Preparing for a Layoff".) 

Tammy Mullin

The charges recorded to your unemployment account have a huge impact on your tax rate.  As noted in a previous blog "Unemployment Benefit Charge Auditing" you should be checking the charges for common charge errors and contesting those charges with the state within the specified time period. 

Thought it might be helpful to let you know the distribution schedule for charge statements by state as well as give you the time limit for contesting the charges.  Some times are very short so employers need to be on top of getting this done timely. 

Tammy Mullin

The "burden of proof" rests with the employer in cases involving a discharge. The employer must prove that the incident(s) which led to the former employee's discharge, amount to misconduct as defined by the applicable state statute. Misconduct can be established by the violation of a reasonable employer rule or expectation. The employer must show that the former employee's actions or omissions to act were willful and either actually harmed or had the real potential to have harmed the employer's business. Acts of inability, poor judgment, and good faith errors will generally not be sufficient to establish misconduct.

Witnesses should be prepared to provide the initial background information regarding the former employee's employment, describe the final incident that lead to the discharge, discuss prior disciplinary action and relevant company policy/procedure. Additionally, the witness must establish what impact or potential impact the former employee's action(s) had on the employer's business, i.e., monetary loss to the employer. Also, note that an isolated instance will generally be insufficient to establish misconduct. Verbal and written warnings that were given for the same reason as the discharge reason are important to show misconduct.

If the final incident is within the control of the employee or they could have prevented this final incident, then it is a case worthy of pursuing. However, if the final incident is beyond the employee's immediate control, then this may be a case which cannot be won. An example might be a discharge for tardiness - the final incident being when the employee's car broke down or they may have had to take their child to the hospital because of an emergency. These are situations the employee could not have prevented.

Tammy Mullin