List items for 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 your 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 unemployment benefits alone.
- Keep health insurance and retirement benefits.
- Continue building job tenure.
To participate in STC as an employer, you must:
- Be current in filing quarterly unemployment insurance reports.
- Have paid all unemployment insurance taxes owed in full.
- Not be using STC for seasonal work reductions.
- Provide notice to employees participating in the STC Program.
- Certify that the STC Program will meet all federal and state laws.
- Not lay off any employee -- whether or not that person is employed within an impacted unit -- 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. Your plan must include:
- The name or designation of the work unit that would be affected.
- A list of affected employees, including part-time employees (minimum of five).
- The planned percentage of work hour reduction (must be between 20 percent and 50 percent and be the same for all affected employees). The reduction of work hours must not be based on a work week exceeding 40 hours.
- An estimate of the number of layoffs that would occur without STC.
- The impact (if any) on employees’ fringe benefits.
- A certification by you (as the employer) that the plan will not affect health and retirement benefits.
- The expected number of weeks that reduced work hours will be needed.
- Whether affected employees are covered by a collective bargaining agreement.
- A certification that your business 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 there is a collective bargaining agreement in place, approval also must be obtained from an employee representative.
Yes. STC benefits are paid from the same fund as regular unemployment insurance benefits. They are treated exactly the same when it comes to charging employer accounts. Your business should be aware that using STC may impact your unemployment insurance tax rate in the same way as unemployment benefits paid to laid-off employees.
Payments are based on the percentage reduction in work hours. For example, if work hours are reduced by 20 percent, an impacted employee would receive 20 percent of the weekly unemployment insurance 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. Be aware that your company's use of STC may affect your unemployment insurance tax rate. This will be similar as to when laid-off employes collect regular unemployment benefits.
Yes. Your business may provide a training program for affected employees 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.
Work is seasonal if what your business makes or the service that it provides is significantly reduced at certain times each year. Seasonal workers are not eligible for the STC program.
Yes. However, the number of employees covered by the STC cannot change while your business is participating in the plan. Nor can any layoffs take place once the plan is in effect.
The program is an employer-based program. Your responsibilities as an employer 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. Your employees will submit their own initial claims at the beginning, then you will file weekly STC claims after that.
Each week, you must submit the STC weekly certification in iowaworks.gov. This will include the number of hours worked and other details for each STC employee. 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 your 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 percent reduction of usual work) in a week is not eligible for STC benefits and is reported as 40 hours.
The employer should complete 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 must first qualify to receive unemployment benefits. To determine eligibility, IWD will calculate the Weekly Benefit Amount (WBA). The WBA is determined by the gross wages an employee earned during the highest quarter of the base period (explanation below) and by the number of dependents claimed.
Base Period
The base period is a four-quarter (one-year) period of time used to decide the WBA and maximum benefit amount (see question “What is the Maximum Benefit Amount?”). The amount of wages earned in the base period determines the 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 unemployment benefits claim was filed. IWD does not use the most recent four to six months before a claim is filed to determine monetary 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 benefits using the regular base period, it may be possible to file a claim using an alternate method. The most recent four completed calendar quarters then are used to determine monetary 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.
The Maximum Benefit Amount (MBA) is either 16 times the Weekly Benefit Amount or one-third of the total base period wages, whichever is lower.
To be eligible to participate in STC, affected employees must:
- Qualify for Unemployment Insurance benefits.
- Not have an existing unemployment 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 unemployment 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 must 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 that 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.