By Katie Clayton and Cherity Smith
Since the economic downturn took hold, each day brings another announcement of employee layoffs and corporate downsizing. Recent blog entries have looked at options such as layoffs, furloughs, and reducing hours of work. There is another option in Canada – work-sharing.
What is work-sharing?
Work-sharing is an adjustment program created by the Canadian government. It provides income support to employees eligible for employment insurance benefits who are willing to work a reduced workweek. The reduced workweek would be for a defined time period in order to help the employer avoid layoffs.
The goal of the program is twofold:
- to help employers keep skilled employees and avoid the costly process of recruiting and training new employees when business returns to normal levels; and
- to help employees maintain their skills and jobs by supplementing their wages for the days they do not work.
Under a work-sharing agreement, employers can shorten an employee’s workweek by one to three days. For the hours, days, or shifts not worked by the employee, the employee will qualify for employment insurance benefits.
Normally, work-sharing agreements must be in place for six to 26 weeks, with the possibility of being extended to up to 38 weeks. However, in recognition of the current economic crisis, the Canadian government has increased the maximum agreement duration to 52 weeks. To take advantage of the 52-week option, applications must be received between February 1, 2009 and April 3, 2010.
Eligibility
So can any employer qualify? Not quite. Employers must have a minimum of two employees and they must have the employees’ agreement to participate. If the employees are unionized, the union also must agree.
In addition, eligible employers must:
- have been in year-round business in Canada for at least two years;
- show that the need for reduced hours is unavoidable; and
- show that the work shortage is temporary and unexpected.
Employers who provide seasonal or temporary activities will not be considered for work-sharing. Businesses that are undergoing a labor dispute or whose work shortage is the result of a labor dispute at a supplier or customer are also ineligible.
Eligible employees must:
- be year-round permanent full-time or part-time employees who are not essential to the development and implementation of the recovery of the business (i.e. senior management); and
- be eligible to receive regular employment insurance benefits.
However, as of February 1, 2009, employees who were laid off before the submission of a work-sharing agreement may participate in such an agreement if they are necessary to maintain the viability of business during the recovery period.
Application and development of recovery plan
As part of their application, employers must submit a recovery plan outlining the steps being taken to ensure the viability of their business. They also must show the planned return to normal working hours as the economy strengthens. The recovery plan should include:
- a general history of the business;
- comparisons of sales, business levels, and operating costs over the past two years;
- information on the cause of the work shortage specific to the business and economic downturn;
- a description of any measures taken by the employer before applying for the work-sharing program to remain viable during the downturn in business;
- a statement that the employer plans to resume normal business levels in the future;
- a description of activities considered important to the continued viability of the business; and
- a description of any employee skills enhancement/upgrading to take place during the life of the agreement.
Employers are expected to provide as much information as possible to support their application. However because of the uncertainties arising from the current economic downturn, the Canadian government has recognized that not all employers will be able to provide all the elements listed above or be able to articulate specific timelines or benchmarks for recovery. So now’s the time to apply for work-sharing if it is an option in your workplace.