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March 8, 2010

State's Shared Work Plan Softens Impact Of Cutbacks

CONTRIBUTED PHOTO Erich Holman, a 13-year machinist with Tri-Star Industries, says the state's shared work plan has kept his family in pay and benefits.
CONTRIBUTED PHOTO Andrew Nowakowski, president, Tri-Star Industries, Berlin

Businesses facing the prospect of having to lay off valuable employees have an ally in a state program that’s being hailed as both “brilliant” and “a life-saver.”

The state Department of Labor’s Shared Work Plan allows workers whose hours have been cut to collect prorated unemployment benefits. The workers retain health and retirement benefits and the businesses retain their staff at a reduced cost.

To date, about 6,000 employees and 800 businesses have participated in the program, according to Department of Labor Communications Director Nancy Steffens.

“It was a lifesaver,” said Andrew Nowakowski, president of Tri-Star Industries in Berlin. The 19-year-old company had its best year in 2007, but by mid-2008 business slowed. Tri-Star employs 32 workers in the manufacture of brass and steel inserts for other manufacturers.

The state’s Department of Labor was proactive and contacted Nowakowski about the Shared Work Plan in the summer of 2008, Nowakowski said. At that time, Tri-Star didn’t need any assistance, but that changed a few months later.

The program allows companies like Tri-Star Industries to reduce employee hours by 20 to 40 percent — often from a five-day work week down to four or even three — with the state paying unemployment insurance benefits for the balance of hours.

Although there were a few layoffs, Tri-Star put most of its employees on a three- or four-day work week starting in January 2009. Nowakowski, the sales manager and office manager stayed on fulltime, but each took a pay cut. Today, Tri-Star’s office staff is back to fulltime and Nowakowski said orders have picked up to the point where he hopes to be off the program altogether by summer.

“Machine operators are not a dime a dozen,” Nowakowski said. “They are good guys and they are hard to find.” Many have been with the company for years.

If it hadn’t been for the Shared Work Plan, Nowakowski said, he would have been forced to lay off more workers, with the possibility that they would have gone to other employers, or moved out of the area, making it difficult to ramp up quickly when business started picking up, as it is now.

“We would have had to do away with the second shift” without the Shared Work Plan, Nowakowski said. “It would have been a whole different ballgame.”

The program also provides a break to the unemployment insurance compensation fund.

Since summer , the Connecticut Department of Labor has been processing more than 177,000 unemployment claims weekly, and paying out about $60 million in unemployment insurance claims, Steffens said. But thanks to this innovative, flexible program, at least some of the layoffs have been partially mitigated.

In December, the agency provided approximately $2.28 million in Shared Work unemployment benefits. That’s a sharp increase from the $180,000 paid in the fourth quarter of 2008. The program has been around since 1991.

“This is an excellent program that is offered in 17 states, too, but Connecticut’s program is considered to be one of the best and is used as a model for other states,” Steffens said, adding that Connecticut’s program requires employers to maintain employee’s benefits — something not all other states require.

The Shared Work Plan benefit rate is calculated much like regular unemployment insurance, using an average weekly pay rate. As of now the federal government is also kicking in an extra $25 under the American Recovery and Reinvestment Act.

The program is low on paperwork, Nowakowski said , and the checks were mailed to their employees “like clockwork.” Employers are charged quarterly for workers filing for partial unemployment benefits.

Steffens said the agency plans to have a direct deposit program in place by this summer.

Nancy Barbato, sales associate with Tri-Star Industries, said she was grateful for the program. Now back to work fulltime, Barbato said initially it was a little frightening, but, “You were happy you weren’t losing your job.”

Machinist Erich Holman, who has been with Tri-Star Industries 13 years, is a husband and father with children to support and a mortgage to pay.

“It has been an absolutely fantastic program for us,” Holman said. “It keeps us employed while allowing us to keep our benefits. It’s really important to have my benefits.”

Tri-Star’s experience isn’t unique.

David Edgar, vice president of human resources at Reflexite Co. in Avon and New Britain, said, “It’s a brilliant, brilliant program.”

Edgar credited the state program for helping Reflexite survive this recession intact. “It’s been a real key ingredient to get us through,” he said.

Reflexite started using the program in the fall of 2008 along with a menu of other job-saving options, such as wage freezes and pay reductions. “Everyone was sharing the pain,” Edgar said.

The firm continued on the state program for about a year, reducing hours to a four-day and sometimes three-day workweek, until business started to pick up again. Normal production schedules have resumed.

Reflexite, celebrating 40 years in business, has been an employee-owned company since 1985, with employees owning over 50 percent of the company stock, Edgar said. The company manufactures and sells reflective wear as well as solar reflective lenses, using a micro-prism technology invented by two entrepreneurs, Bill and Hugh Rowland, from New Britain. It has 145 workers in Connecticut and a total of 450 worldwide.

“It helps preserve jobs,” Edgar said of the Shared Work Plan. “It was particularly useful because it allowed us to hold onto the talent,” rather than having to start from scratch and training new hires a whole new skill set.

While the Shared Work program has been a success for Reflexite, Edgar cautioned there is a limit to how long any company should continue using it.

“I think at some point you reach diminishing returns where you need to consider right-sizing the company,” he said. “After a while, there is probably a tipping point.”

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