Unemployment Benefits 101. Hiring 2020.
Tips for transitioning workers from unemployment benefits to your payroll
Job losses happen. It’s a stressful, scary time for American workers and their families. Fortunately, we have a system in place to help many who are affected. Introduced in 1935, our federal-state unemployment insurance system (UI) temporarily replaces part of a worker’s wages while they look for new work. Employers fund the majority of the system by paying unemployment insurance tax to their individual state and the federal government—the amount of tax is based on how many employees they have.
So who’s in charge?
While the US Department of Labor oversees the entire system, the states run the basic UI program. They provide most of the funding and pay the benefits to workers, while the feds pay only the administrative costs. Each state has flexibility in determining specifics, such as eligibility requirements, compensation amounts and how long participants can collect benefits.
In most states, workers who qualify for benefits are eligible for up to 26 weeks. This timeframe may vary depending on the total of the worker’s past earnings. It also may depend on whether the wages were earned during all four quarters of a calendar base period and how evenly they were distributed across those quarters. Most states will replace half of a worker’s previous earnings, up to a maximum compensation level.
Under certain circumstances, workers may be able to receive additional benefits. In 1970, Congress established the Extended Benefits program (EB) as a way to help those workers in high-unemployment states who have exhausted their regular, state-provided UI benefits. It can provide another 13 to 20 weeks of compensation. This number will depend on specific unemployment thresholds a state reaches and its unemployment insurance laws. The federal government and the individual states share the cost of this program equally.
Unemployment benefits can also come by way of temporary or permanent programs put in place by the states or temporary federal emergency programs that are fully funded by the federal government. Federal programs offering extended weeks of unemployment compensation are normally administered during severe national economic downturns, like during the Great Recession that occurred between 2007 and 2009.
Unemployment benefits in the time of a pandemic
You may have noticed that we’re currently struggling through what some might call the mother of all downturns. The COVID-19 pandemic has crippled the world economy. Here at home, tens of thousands of businesses have closed, temporarily or for good. And more than 42 million workers have filed for unemployment benefits. To mitigate some of the loss, Congress passed the $2.2 trillion CARES Act (The Coronavirus Aid, Relief, and Economic Security Act). This included $700 million to support small businesses.
The federal act funded several temporary measures to strengthen unemployment benefit assistance. For starters, it supplemented the weekly benefit amount states provide through their UI programs with an additional $600. According to the Center on Budget and Policy Priorities, in April 2020, the national average weekly UI compensation was $333, so the extra $600 was a significant boost. However, this benefit expired at the end of July. The act also provided all states with up to 13 weeks of Pandemic Emergency Unemployment Compensation (PEUC). This assistance kicks in when a still-unemployed worker uses up all of their UI benefits and before any EB benefits kick in. EB has triggered in 44 states, Washington, DC, Puerto Rico and the Virgin Islands, and is temporarily being funded solely by the feds. Finally, for workers who aren’t eligible for their state’s UI program, the act created Pandemic Unemployment Assistance (PUA). This gives employees without enough work history, plus many part-time, self-employed and contract workers up to 39 weeks of benefits. PEUC and PUA are both set to expire at the end of the year.
When it’s time to bring back workers
Despite frustrations over whether Congress will pass another CARES-like stimulus bill and concerns of a second wave of COVID-19, many small businesses are cautiously optimistic about the future and plan to increase staff in the next year. If you decide to rehire laid-off employees or hire new personnel, here are a few unemployment-specific things to consider.
Federal law requires employers to report newly hired employees to the National Directory of New Hires. This includes rehired employees who have been separated from employment for at least 60 days. You must report within 20 days from the date of hire. State laws also have new hire/rehire reporting requirements and deadlines.
If you plan to hire a worker on a reduced-hours basis, they may still be able to collect some unemployment compensation. Generally, if the employee is working less than full-time hours and weekly wages are less than their weekly benefit amount determined by the state, they may be eligible for partial benefits (which differ per state).
If your business laid off workers and received a federal loan through the Paycheck Protection Program (PPP), you can obtain complete loan forgiveness by rehiring those workers by December 31, 2020. Many employers have had rehire offers rejected by former employees, which clearly makes restoring a full headcount (and achieving 100% loan forgiveness) impossible. Thankfully, the Small Business Administration is offering an exemption to businesses in this situation, provided they meet a number of conditions relating to properly documenting the offer and rejection and notifying their state’s unemployment office within 30 days of the rejection.
Depending on your state, unemployment benefit claims filed due to COVID-19 will not be charged to your account and potentially increase your experience rating. Many states have already adopted this policy.
Hiring in a business-as-unusual environment
The pandemic is making us rethink how we work and challenging businesses to find new ways to structure staffing and attract talent. A first priority for any company today is to ensure that employees have a safe place to work. From masks and PPE to social distancing enforcement, make a heroic effort to have robust COVID-19 protocols in place.
Consider alternatives to hiring full-time employees. Could you use contract workers instead to save money on onboarding costs? Could you design a workshare program that reduces hours across your team but allows workers to be eligible for partial unemployment benefits? Many states offer workshare programs and require employers to submit a plan for approval. Or could you form an employer partnership with others in your industry where each hires the others’ furloughed or laid-off workers? It’s a flexible solution that can supply qualified workers.
You may want to explore financial incentives, such as a temporary increase in wages, signing bonuses or paid sick leave. How might you offer employees more flexibility? Hourly workers would like to have it, especially with the demands the pandemic has placed on them—including homeschooling, taking care of loved ones who may be ill and much more.
What other perks or incentives could you offer? Maybe generous product discounts. What about mental health resources, such as online counseling and yoga/meditation classes? Or possibly membership in a farm CSA, grocery store gift cards or subscriptions to streaming video services and podcasts?
Finally, it may be worth positioning your business as a place for long-term career growth and providing workers with opportunities for skills training, continuing education assistance and promotions.
Having a better understanding of the unemployment insurance system will help you run your business, advise your workers and recruit talent.