Companies Implement Part-Time Layoffs

Enlarge Curt Nickisch/WBUR for NPR

Employee Alex Monell bends metal at Modern Heat, a sheet-metal shop in Gloucester, Mass., that has implemented worksharing to retain its experienced workers and save some money.

Curt Nickisch/WBUR for NPR

Employee Alex Monell bends metal at Modern Heat, a sheet-metal shop in Gloucester, Mass., that has implemented worksharing to retain its experienced workers and save some money.

In the small seaside town of Gloucester, Mass., business has been so slow at Modern Heat, a sheet metal shop, that there's often only one machine running at a time.

Bernard Savo, who runs the operation, says the sluggish economy has really cooled sales.

"When we didn't have enough money coming in to take care of the payroll, we knew that we had to do something at this end to cut the overhead," Savo says. "The insurance still goes on. The electric still goes on. But the payroll was what was killing us."

Normally, cutting payroll means cutting jobs. But Savo did not want to lose experienced workers, only to have to hire and train replacements when orders pick back up again.

A Shared Impact

Instead of laying off part of his workforce, Savo's laying everyone off part time.

He's doing so as part of a state program called worksharing.

Under this little-known program, offered in 18 states, employees collect unemployment only for the hours they're cut back. To weather the economic slowdown, a growing number of companies are laying people off for part of the workweek.

"If I had the work, I [would] put them back to work full time. I have no choice but to keep them working three days a week and then unemployed for two," says Savo.

Maintaining Benefits

His employees still draw full benefits — health care and retirement — under worksharing. But for the two days they're not on the job, they get unemployment from the state.

Savo's staff is pretty torn about the plan. Longtime employee Alex Monell says the unemployment he gets only makes up about half of what he would have been earning for those two days.

"I don't have a family or a mortgage, so I'm not in too bad shape," Monell says. "And it comes at a time of the year when it's sort of nice to have some extra time off. But in general, I'm living on my savings. It's dropping."

Shorter Workweek

The drop was too much for another employee with a family. The welder took another job. Still, the rest have stayed on, resigned that a three-day workweek is better than a no-day workweek.

"It's good for the economy here because these people do have a job to go back to," says Edward Malmborg, the director of Massachusetts' unemployment division.

He says the number of people in worksharing programs in the state has shot up by more than one-third so far this year. Many of the 17 other states that offer part-time layoffs are seeing big increases, too. In Florida, the number is on track to triple this year from 2007, according to the U.S. Department of Labor. Malmborg says companies want the flexibility to bring employees back full time as soon as the economy gets better.

"That's what we really like to see," he says. "Doesn't always work out, but in a large number of cases, we've seen that it has."

Malmborg says part-time layoffs don't appear to drain the state's pool of unemployment money any more or less than conventional pink slips.

Limited Savings

But worksharing is not necessarily a wash for the companies themselves.

"The downside is that the costs don't fall proportionately with the hours," says Paul Osterman, a labor market economist at the Massachusetts Institute of Technology. He says businesses don't save as much money up front as they would through regular layoffs.

"If you still have to maintain benefits and so on, two half-time people are still more expensive than one full-time person," Osterman says.

He says companies have to weigh that against the savings that worksharing brings down the road by not having to rehire. The shorter the economic downturn is, the more part-time layoffs pay off, he adds. The big jump in worksharing recently suggests companies are betting the slowdown will be short-lived.

Curt Nickisch reports for member station WBUR.