A restructuring at the government-controlled State Compensation Insurance Fund to be implemented in 2012 will result in a reduction in force that will eliminate between 1,500 and 1,800 positions, according to an internal communication issued by the organization’s management on Thursday.
The restructuring is expected to save the State Fund $200 million a year.
The layoffs, which equate to roughly 25 percent of the workforce, are expected to be effective in the second quarter of next year.
“The positions being eliminated are in areas where business processes have changed significantly enough that work has been substantially reduced,” the communiqué states.
The decision apparently follows a detailed review of San Francisco-based State Fund’s business, including comparing State Fund to other state funds and specialty companies that write workers’ compensation in California.
State Fund spends more operating the company than it does paying benefits to injured workers, according to the organization.
While it’s not yet clear which employees will be laid off, employees in the WCPA, or payroll auditor, classification and below will likely be most affected, according to State Fund.
The job classifications where work has been reduced due to technological changes, or changes in business practices, are top considerations for elimination.
State Fund has not had layoffs since the 1930s.
State Fund has historically relied on attrition to manage staffing levels to cull the workforce.
“While general attrition has reduced staff size, it could never address changing business processes or prepare the company for the future,” a Q&A issued to State Fund employees states. “So, in addition to being overstaffed, we also have significant misalignment between the work at State Fund and our staffing. We must take action to lower our expense ratio and improve our efficiency. This layoff is a difficult but necessary next step.”