S hort-time compensation (STC), sometimes called work sharing, is a program within the federal-state unemployment compensation (UC) system. The reasons for this seem to be a combination of difficulty the U.S. Department of Labor (U.S. DOL) has had in implementing the 1992 authorizing legislation, lack of awareness on the part of employers, unsuitability of work sharing arrangements for some firms or workers, and costs of the program. Despite these changes, the proportion of UC claimants participating in STC remains low. The terms short-time compensation and work sharing are sometimes used interchangeably, however the term work sharing also refers more broadly to any arrangement under which a firm chooses to reduce work hours across the board for many or all workers instead of permanently laying off a smaller number of workers. In a typical example of work sharing, a firm that must temporarily reduce its 100-person workforce by 20% would accomplish this by reducing the work hours of the entire workforce by 20%—from five to four days a week—in lieu of laying off 20 workers. Workers whose hours are reduced are sometimes compensated with STC, which is equivalent to regular unemployment benefits that have been pro-rated for the partial work reduction. 112-96 , the term short-time compensation program means a program under which
employers participate on a voluntary basis and submit a written plan to the appropriate state agency; an employer reduces the number of hours worked by employees in lieu of layoffs; employees' workweeks have been reduced by at least 10% and by no more than the percentage determined by the state (if any, but in no case by more than 60%); STC is paid as a pro rata portion of the unemployment compensation that would otherwise be payable to the employee if such employee were employed; eligible employees are not required to meet the "able, available and actively seeking work" requirement of regular unemployment compensation, but they must be available for their normal workweeks; eligible employees may participate in a state-approved, employer-sponsored, or Workforce Investment Act training program; and employers who provide health or retirement benefits (defined benefit or defined contribution pension plans) must certify to the appropriate state agency that such benefits will continue to be provided to STC participants under the same terms and conditions as though the workweek of such employee had not been reduced or to the same extent as other employees not participating in the STC program. Currently, over half of the states and the District of Columbia have enacted STC programs. The administrative costs of STC programs have been a concern for state labor agencies. In addition, STC may increase processing costs for the state agency relative to layoffs because, for a given firm, work sharing affects a larger number of workers than if the firm were to lay off workers. Massachusetts has offered to make its software available at no cost to other states. Work sharing and STC arrangements can also reduce recruitment and training costs for employers. Work sharing and STC arrangements may help sustain employee morale and productivity compared to layoffs. The STC firms, however, also continued to lay off workers. In addition, production technologies may make it expensive or impossible to shorten the work week. Employees

Work sharing helps workers who would have faced layoffs avoid significant hardship, while spreading more moderate earnings reductions across more working individuals and families. When work sharing is combined with STC, the income loss to work sharing employees is reduced. Many state STC programs also require that employers continue to provide health insurance and retirement benefits to work sharing employees as if they were working a full schedule. STC cannot forestall what may be an inevitable layoff, however. Temporary Federal Financing

P.L. Administrative Grants

Under P.L. 112-96 in February 2012 to promote state adoption and implementation of STC programs; however, STC remains a little-used program.
Short-time compensation (STC) is a program within the federal-state unemployment insurance system. In states that have STC programs, workers whose hours are reduced under a formal work sharing plan may be compensated with STC, which is a regular unemployment benefit that has been pro-rated for the partial work reduction.
Although the terms work sharing and short-time compensation are sometimes used interchangeably, work sharing refers to any arrangement under which workers' hours are reduced in lieu of a layoff. Under a work sharing arrangement, a firm faced with the need to downsize temporarily chooses to reduce work hours across the board for all workers instead of laying off a smaller number of workers. For example, an employer might reduce the work hours of the entire workforce by 20%, from five to four days a week, in lieu of laying off 20% of the workforce.
Employers have used STC combined with work sharing arrangements to reduce labor costs, sustain morale compared to layoffs, and retain highly skilled workers. Work sharing can also reduce employers' recruitment and training costs by eliminating the need to recruit new employees when business improves. On the employee's side, work sharing spreads more moderate earnings reductions across more employees—especially if work sharing is combined with STC—as opposed to imposing significant hardship on a few. Many states also require that employers who participate in STC programs continue to provide health insurance and retirement benefits to work sharing employees as if they were working a full schedule.
Work sharing and STC cannot, however, avert layoffs or plant closings if a company's financial situation is dire. In addition, some employers may choose not to adopt work sharing because laying off workers may be a less expensive alternative. This may be the case for firms whose production technologies make it expensive or impossible to shorten the work week. For other firms, it may be cheaper to lay off workers than to continue paying health and pension benefits on a full-time equivalent basis. Work sharing arrangements in general also redistribute the burden of unemployment from younger to older employees, and for this reason the arrangements may be opposed by workers with seniority who are less likely to be laid off.
From the perspective of state governments, concerns about the STC program have included the program's high administrative costs. Massachusetts has made significant strides in automating STC systems and reducing costs, but many other states still manage much of the STC program on paper.
Currently, approximately half of the states and the District of Columbia have enacted STC programs to support work sharing arrangements. However, few UC beneficiaries are STC participants. At the peak of its use in 2010, the STC beneficiaries totaled nearly 3% of regular unemployment compensation first payments. The reasons for low take-up of the STC program are not completely clear, but key causes include lack of awareness of the program, administrative complexity for employers, and employer costs. P.L. 112-96, passed in February 2012, offered grants to states to help bring attention to the states' STC laws. In addition, P.L. 112-96 provided temporary federal funding to states that have existing STC programs or to create a new one. Despite these changes, the proportion of UC claimants receiving funds from STC remains low relative to overall UC claims.