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Small Business Human Resources Workforce Development Your Questoins Answered Success Stories

March 2004 — Vol. 82, No. 2

YOUR QUESTIONS ANSWERED

Have a personnel-related or business tax question? Members can get free information from CBIA’s experts. The phone number is 860-244-1900.

 

Q: We’re looking at a temporary decline in business and have to decide whether to lay off several employees or reduce hours. If we reduce hours, and the employees are working eight to 10 fewer hours each week, will they be able to collect unemployment?

A: The state Department of Labor has a Shared Work Program that provides an alternative to layoffs and could be what you need right now. Rather than laying off a percentage of the workforce, an employer may reduce the hours and wages of all employees or a particular group of employees. The employees whose hours and wages are reduced can receive partial unemployment insurance benefits to supplement their lost wages. These partial benefits are made possible through special eligibility regulations governing the Shared Work Program. Among the program’s requirements:

  • The employer must have four or more full-time employees participating in the shared work plan.
  • The employees must have a reduction in hours and a corresponding reduction in wages of not less than 20% and no more than 40% of the full-time norm.
  • The employees’ fringe benefits may not be reduced or eliminated during the time the plan is in effect.
  • The program must be in lieu of a layoff of an equivalent percentage of employees.
  • Employees must be eligible for regular unemployment compensation.
  • No employee may receive a combination of shared-work benefits and regular unemployment comp benefits that exceeds the maximum total benefits payable to the claimant during the course of his or her benefit year.

Here’s an example of how the program works. A company facing a 20% drop in production might normally lay off one-fifth of its workforce. Instead, a company with a shared-work plan could retain its total workforce on a four-day basis. The reduction from 40 to 32 hours would cut production by the required 20% without reducing the number of employees. Affected employees would receive their wages based on four days of work and would receive a portion of unemployment benefits equal to 20% of the total weekly benefit rate that would have been payable had they been unemployed a full week.

While the program may not fit every company’s needs, it does have some advantages. An employer can retain its workforce and avoid the time and expense of training new employees when business picks up. The plan also fosters better morale among employees because the company is spared the unrest characteristic of most layoffs.

To participate in the Shared Work Program, you must submit a written application to the Department of Labor. For more information, click here or call the department’s Unemployment Technical Services Unit at 860-263-6770.

Q: We are a Connecticut business that makes custom goods. We require our customers to pay a deposit a few months in advance and the balance upon completion of the work. We collect tax on both the deposit and final sale, and reflect that in our sales and use tax reports to the state. Are we handling this the right way?

A: Probably not. Sales tax is due when a sale has taken place. Based on the scenario you describe, the Department of Revenue Services (DRS) would likely find that because the customer did not retain possession nor have title to the goods upon payment of the deposit, a sale did not take place at that point. There would be no tax liability until final payment is made. For more information, call the DRS at 1-800-382-9463.

Q: An employee has complained that we’ve withheld too much from his check. What should I do?

A: First, both you and the employee can check the withholding tables at the Department of Revenue Services Web site. Second, if the wrong amount is being withheld, you can file a new CT-W4, and on line 3 make the proper adjustment. Note that changes to Connecticut’s income tax in 2003 have created some confusion. Some single filers checked the wrong letter (D instead of F) on their W4, which resulted in a different amount being withheld from their paychecks than they expected.

 

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