It may seem like a distant memory now, but this winter was a doozy – record snowfall, blizzards, storms and icy conditions wracked the Northeast seemingly nonstop. This pattern of nearly constant snow and ice deterred many commuters from getting to work.

A severe winter has the potential to seriously threaten the livelihood of hourly workers and their families. Millions of hard working Americans — engineers, construction workers, transportation professionals, maintenance and laborers (to name a few) — are routinely unable to do their jobs because of weather conditions. Through no fault of their own, projects halt and paychecks stop.

In a recent conversation I had with a prospective client looking to solve this exact problem, I was not surprised when the company’s head of HR stated, employees “make all of their money when they work. Otherwise, they just starve.”

This is a serious problem, both for the employees and the organizations that employ them.

A common solution for organizations facing regular, seasonal work stoppages is to implement a salary continuation program and continue paying employees their regular wage while they are not working. The problem with doing this, and the main reason most companies do not offer salary continuation, is it is extremely costly.

Many executives find themselves having to choose to either pay salary continuation and suffer a hard hit to their bottom line, or administer seasonal layoffs, creating low morale and often resulting in the loss of trained, skilled workers. What’s needed in this scenario is an alternative benefit that supports both the interest of the employee and the organization.

According to the Wells Fargo Employee Benefits Survey, executives site their top three goals of employee benefits as:

1)      Maintaining productivity of employees.

2)      Managing overall costs.

3)      Maintaining the current level of employee benefits offered to employees.

Using this criterion, it is clear that neither salary continuation nor seasonal layoffs provide an acceptable, efficient benefit when it comes to addressing seasonal work stoppages.

A solution

By using the long-standing, yet little-known, IRS approved supplemental unemployment benefits (SUB) plan, a company can ensure their employees receive 100% of their regular income during work stoppages, while saving 25%-45% of their cost compared to a traditional salary continuation program. Under this scenario, a company can afford to protect their employees’ livelihood, without hurting their own profitability.

 A SUB plan works by integrating state unemployment benefits so that the company-sponsored benefit combined with the state UI benefit equals 100% of the employee’s regular wage during a temporary work stoppage. Additionally, because SUB payments are classified by the IRS as “benefits,” rather than “wages,” both the payment and the receipt of SUB benefits are exempt from payroll taxes (FICA/FUTA/SUTA).

A SUB plan bridges the gap between employee and company needs during difficult times. For organizations with existing salary continuation programs, converting to a SUB plan can free up significant dollars for other key benefits. For organizations practicing seasonal layoffs, a SUB plan may be an affordable way to provide a secure, reliable income to your valued employees during hard times.

Corley is senior vice president at Transition Services Inc. Lana Pancoast, manager, business development & client services at Transition Services, is a contributing author.

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