Frequently Asked Questions: Short-Term Compensation (STC)

Under STC, employers can:

• Maintain productivity and quality levels (because the same experienced employees are doing the work).
• Keep the ability to expand operations quickly when business conditions improve.
• Reduce training costs by keeping the workforce intact.
• Avoid costs related to hiring and reassignments.
• Avoid transfers, demotions, and tenure-based layoffs.

With STC, employees can:

• Keep job skills sharp.
• Maintain a higher family income than with UI benefits alone.
• Keep health insurance and retirement benefits.
• Continue building job tenure.

To participate in STC, the employer must:

• Be current in filing quarterly UI reports
• Have paid all UI taxes owed in full
• Not be using STC for seasonal work reductions
• The employer will provide notice to employees participating in the STC Program.
• The Employer must certify the STC Program will meet all Federal and State laws.
• The employer will not lay-off an employee, whether the employee is employed within an effected unit or not, while participating in the Short-Time Compensation Program.

Employers wishing to participate in the STC program must complete a short plan application in iowaworks.gov. The plan must include:

• Affected work unit designation
• Listing of affected employees including part-time employees (minimum of five employees)
• Planned percentage of work hour reduction (must be between 20 percent and 50 percent and be the same for all affected employees, and the reduction of work hours for employees is not based on a work week exceeding 40 hours).
• Estimate of the number of layoffs that would occur without STC
• impact (if any) on employees’ fringe benefits
• The employer must certify the plan will not affect health and retirement benefits.
• Expected number of weeks reduced work will be needed
• Whether affected employees are covered by a collective bargaining agreement
• The employer must certify that they will not hire full-time employees for the affected work force while the plan is in operation.

Iowa Workforce Development (IWD) staff can help with completing the application. Employers must fully understand and commit to following the plan as outlined. If affected employees are covered by a collective bargaining agreement, written approval by their representative is also required.

Yes. The STC benefit is paid from the same benefit fund as regular UI benefits. UI benefit payments for STC and UI generally are charged to employer accounts in exactly the same way. Employers should be aware that, just as when laid off employees collect regular UI, use of STC may affect the employer’s UI tax rate.

Payments are based on the percentage reduction in work hours. For example, if there is a 20 percent reduction in work hours, the affected employee would receive 20 percent of the weekly UI benefit payment they would receive if they were laid off for a full week.

Affected work unit means a specific plant, department, shift, or other definable unit.

Employer accounts will be charged in the normal way for benefits paid under the STC program. Employers should be aware that, just as when laid off employees collect regular UI, use of STC may affect the employer’s UI tax rate.

Yes. An employer may provide a training program for affected employees to attend during the regular hours worked. IWD will relieve the employer of UI benefit charges if the training program:

• Is approved by IWD.
• Reduces the potential for future periods of unemployment.
• Increases employee skills.

This may include a training program funded under the Workforce Investment Act of 1998.

Employment is considered seasonal if the production or service provided is significantly reduced at periodic intervals on an annual basis. Seasonal workers are not eligible for the STC program.

Yes, so long as the number of employees covered by the STC plan remains unchanged during the plan and no lay-offs take place with the employer while participating in the Short-Time Compensation Program.

The program is an employer-based program. Employer responsibilities include:

• Submitting the weekly work hours.
• Being available to IWD to resolve issues, concerns and questions.

Once the STC Plan is approved, IWD provides the instructions to employers. For STC claims, the employees file their own initial claims at the start of the STC plan and the employer files the weekly STC claims during the plan.

Each week, the employer must submit the number of hours worked and other details for by each STC employee in the STC weekly certification in iowaworks.gov. When completing the weekly claims in iowaworks.gov, remember:

• IWD considers weeks to run from Sunday through Saturday.
• Hours per week must be reported in whole numbers with no fractions or decimals.
• At the employer’s discretion, hours of paid leave (e.g., paid vacation, paid sick leave, paid funeral leave) and hours of unexcused absence from scheduled work can be reported separately from work hours for the purpose of determining the amount of the STC payment an employee receives.
• An employee with more than 32 hours (or less than a 20% reduction of usual work hours) in a week is not eligible for STC benefits, and is reported as 40 hours.

The employer completes the Claimant Separation Form in the employer portal in iowaworks.gov in the Unemployment Services section.

In order for an affected employee to qualify for STC, he/she needs to first qualify to receive UI benefits. To determine eligibility, IWD will calculate the Weekly Benefit Amount (WBA). The WBA is determined by the employee’s gross wages from all covered employers in the high quarter (HQ) of the base period (see explanation below) and by the number of dependents claimed. 

Base Period

The base period is a four-quarter (one-year) period of time from which the WBA and maximum benefit amount (see question “What is the Maximum Benefit Amount”) are determined. The amount of wages earned in the base period determines the amount of unemployment benefits a claimant may receive.

The base period is the first four of the last five completed calendar quarters at the time an initial UI benefits claim was filed. The most recent four to six months before a claim is filed are not used to determine the monetary benefit eligibility.

EXAMPLE: If a new claim was filed in April, May, or June (second quarter), the base period would be the preceding January 1 through December 31. 

View example image of Base Period.

Alternate Base Period 

If an employee fails to qualify for UI benefits using the regular base period it may be possible to file a claim using an alternate base period. The most recent four completed calendar quarters are used to determine the monetary benefit eligibility.

EXAMPLE: If a new claim is filed in October, November, or December (fourth quarter), the alternate base period would be the preceding October 1 through September 30. 

View example image of Alternate Base Period.

The Maximum Benefit Amount (MBA) is either 16 times the WBA or one-third of the total base period wages, whichever is lower.

To be eligible to participate in STC, affected employees must:

• Qualify for UI benefits.
• Not have an existing UI claim in another state.
• Be able and available to work their usual hours for the STC employer.

If an affected employee does not meet all of the wage requirements, he/she is not eligible to receive UI benefits. In these cases, IWD will review the claim with the worker to determine if there are any missing wages or if an “Alternate Base Period” should be applied. Individuals with a current valid claim in another state are not eligible.

No, an employee does not have to use paid time off before qualifying for STC. At the discretion of the employer, any approved paid time off from work (e.g., paid vacation, paid sick leave, paid funeral leave) may be considered as hours worked for determining the STC benefit.

Employees file an initial claim themselves during the first week of the approved STC plan. During the STC plan, affected employees must accept all work provided by their employer.

Participation is not a requirement. If an employee chooses not to participate, you should inform him/her that his/her work hours will be reduced and they may not receive any compensation.

Yes part-time employees are eligible as long as they meet all other requirements.

STC payments are based on hours of work, specifically, the percentage of reduction from normal hours. At the discretion of the employer, this may include paid leave and deductible hours for unexcused absence when scheduled.

No. The law requires that the STC reduction be applied uniformly to an affected work unit.

Yes, the work schedule can change so long as it is consistent within the affected work unit, and the reduction of hours is 20 percent to 50 percent. It is also permissible to report 32 hours one week (with employees collecting STC benefits) and 40 hours the next week (with no STC benefits paid that week). If the hours worked are substantially different than described under the approved STC plan, the employer may submit an amended plan.

If an employee has received notice that child support is going to be withheld from STC benefit payments and his/her employer is also withholding child support, the employee should contact his/her employer. The employer should then contact the Child Support Recovery Unit by email at csrue@dhs.state.ia.us or by phone 877-274-2580.