Introduction: Building a Strong Workforce
Earlier this week, the International Longshoremen's Association (ILA) officially launched one of the largest U.S. port shutdowns in nearly 50 years, threatening to disrupt key sectors of the economy. As dockworkers strike over pay and job security, companies across the transportation, warehousing, retail, and construction industries are bracing for significant operational slowdowns. These disruptions may force many businesses to furlough or lay off workers as their supply chains potentially grind to a halt.
In light of these challenges, implementing a Supplemental Unemployment Benefit (SUB) Plan could offer companies a strategic and cost-effective way to maintain the income of their employees without incurring the cash flow burden of traditional retention-pay, salary continuation or severance.
A Supplemental Unemployment Benefit (SUB) Plan is a company-sponsored program that provides financial support to employees who are temporarily furloughed or laid off. Under a SUB Plan, employees file for state unemployment benefits, and the company supplements their income to bring it up to their pre-displacement wage. This allows workers to maintain their income without the company shouldering the full cost of wages during downtime. Additionally, SUB payments are exempt from payroll taxes (for both the employer and employee), making this a more tax-efficient way for companies to provide financial assistance to furloughed workers.
Case Study: Lessons from COVID-19
SUB Plans were widely used during the COVID-19 shut-downs, allowing companies to support furloughed employees at a reduced cost compared to continuing to pay full wages. This strategy not only helped businesses stay afloat but also ensured employees had sufficient income to get through the crisis.
As the dockworkers' strike unfolds, businesses can draw from these experiences to minimize the impact on their operations and workforce.
This arrangement benefits both the company and the employees by stabilizing expenses for the business while ensuring workers remain financially secure during periods of reduced work.
The Economic Impact of the Ongoing Strike
The ILA strike is expected to cause widespread economic disruption, with Michael Pearce, deputy chief U.S. economist at Oxford Economics, estimating that roughly 100,000 workers—including those outside the dockworker union—could be affected. Transportation, warehousing, and logistics workers who rely on the ports for steady business are particularly vulnerable, as goods ranging from cars to construction materials are delayed. Without proactive measures, companies could be forced to lay off these workers, adding to the broader economic strain.
SUB Plans can serve as a proactive solution to mitigate these impacts. By allowing affected employees to file for unemployment and providing them with supplemental income, businesses can avoid the heavier financial costs of continuing full payrolls while ensuring their workers have some stability during the strike.
Conclusion
As the ILA strike continues to disrupt U.S. ports and the industries reliant on them, companies must find ways to manage the economic fallout. Implementing Supplemental Unemployment Benefit (SUB) Plans offers a proven method for reducing payroll costs while supporting furloughed or laid-off employees. SUB Plans enable companies to supplement unemployment benefits, helping employees maintain a stable income at a fraction of the cost of paying full wages.
The current strike highlights the importance of having contingency plans in place to navigate disruptions. By adopting a SUB Plan, companies can protect both their financial health and the well-being of their workforce, ensuring they are well-positioned to resume full operations once the strike is resolved.