Hiring Unemployed Workers: What Are the Risks and Benefits?

As the country moves back to full employment, many businesses are facing challenges meeting recruitment needs. As the tight talent market and competitive (in some places extravagant) unemployment benefits add to the difficulty, hiring authorities may consider expanding their normal practices to groups previously not considered.

The long-term unemployed — not just those who’ve taken the pandemic year off because of illness or child care issues — have traditionally been a sore spot for business. For this category of worker, the longer they’re out of work, the harder it is to get a job. It’s a vicious circle for many trying to get back into the job market: for businesses, there may be risk in giving these workers a chance. However, there may also be benefits. As you look to restaff your organization, consider both possibilities before you make a decision.

Skills loss

The longer you’re away from the workforce, the more your skill set diminishes. For entry-level staffers, the problem isn’t as substantial. But as you go up the company ladder, time away can mean significant skills loss and retraining needed. When considering these workers, you’ll want to weigh how much training will be required to get them up to speed. Will they need no more or little more than the average new hire? If so, they might be the right choice.

If there will be a long, expensive learning curve to get them back up to speed, you might want to suggest a part-time role if they can get independent training through an educational program.

If there will be a long, expensive learning curve to get them back up to speed, you might want to suggest a part-time role if they can get independent training through an educational program. An example might be an admin worker whose word processing and spreadsheet skills are outdated. As they take online classes to boost their skills, they could be working part-time — for the full-time role that awaits when they’ve completed the coursework.

If you don’t have enough part-time tasks to keep them busy while they improve their skills, consider a conditional offer of employment. There are many free online classes for the skills you need. Let the candidate know that when they can verify they completed the coursework a job will be waiting for them. You can even choose the classes they need to take. You may even consider subsidizing the classes if it has become a real challenge to hire. It can be a win/win for businesses and the candidate.

Are you the rebound?

Unemployment breeds unemployment. The longer you’re unemployed, the harder it is to get a job. This is a truism workers struggling to get back into the job market have to overcome: they understand having a job makes it easier to get a job. For some, a job — any job — is a stepping stone to the right job. For these workers, the role you offer may be a filler job until they get an offer they really want.

How do you recognize you’re the rebound job? A big red flag may be how overqualified they are. If they are so highly overqualified for the position you’re filling, you’ll want to investigate why they’re taking such a drastic step down in their career. Some candidates may have legitimate reasons for getting off the career track. They may have loved ones that need care, or they may simply have reconsidered their life choices. Do your best to find out what’s motivating the step back so you’re not the rebound job until the right one comes along. Then you won’t be looking to refill the position in 6 months.

The discipline of getting there 

Getting up and getting to work on time is a skill in and of itself. That’s why it’s easier to hire workers who haven’t been unemployed. Someone else has verified they can get there on time and do the work. Many businesses worry that resetting to work mode may be a challenge. When considering hiring the long-term unemployed, expect a few glitches in the tardiness area at the beginning. If it doesn’t resolve quickly, you may have to rethink your choice.

Another area that may fall into the “use-it-or-lose-it” area can be taking orders from others. While you’re not a military installation, you’ll still need workers who carry out instructions. Again, there may be a learning curve to realign to worker bee mode: don’t let the alignment take too long.

Benefits bounce

Another risk for business is unemployment insurance. For many workers, when benefits run out they’re back to work long enough for re-eligibility. Look to your state for guidance on how long an employee has to be on the payroll to be eligible for benefits. Also find out how long they can stay on benefits before they run out and the worker has to find another job to restart the process. Then look for patterns. Does the candidate have a job for 6 months, then take a year off? Does your state unemployment benefit guidance align with their work pattern? If so, the candidate may be gaming the system for the benefit.

Background checks are valuable here to make sure candidates are not job hopping their way in and out of the unemployment benefit system.

You may think a guaranteed 6-month employee is worthwhile for short-term needs. But in the long term, hiring these workers will increase your unemployment insurance benefits’ experience and ultimately the costs you pay into the system. Some workers cleverly neglect to list all their past employers to avoid the pattern showing up on their application. Background checks are valuable here to make sure candidates are not job hopping their way in and out of the unemployment benefit system.

If you must hire a candidate you think may be manipulating the system, make sure to assess them as an employee before your organization is the employer of record for the unemployment benefit. This is typically 30 days from their start date, but may vary by state. Create a probationary period that determines whether or not they’ll be staying on the payroll in advance of that date. If they’re working out, great. If not, make sure you’re not on the hook for their next round of unemployment payments.

Benefits of hiring the long-term unemployed

Here are reasons to consider bringing on workers who have been unemployed for a long period of time.

Committed employees

For many candidates, getting back into the workforce is more than a desperate financial need, it provides a sense of self-worth and pride. For businesses who can find these job seekers, a long-term hire may be the result. Look for workers whose employment gap(s) were single instances that can be explained — such as birth of children, market conditions, or caring for a loved one in need. These workers will be loyal, grateful staff additions worth taking a risk to hire.

Tax incentives

Some employers can access tax incentives from the government if they hire the long-term unemployed. The Work Opportunity Tax Credit (WOTC) targets specific categories of workers who reside in empowerment zones and have suffered joblessness or barriers to employment. Businesses receive tax credits equal to income tax liability or Social Security tax owed, up to $9,600 per employee.

The Work Opportunity Tax Credit (WOTC) targets specific categories of workers who reside in empowerment zones and have suffered joblessness or barriers to employment. Businesses receive tax credits equal to income tax liability or Social Security tax owed, up to $9,600 per employee.

Examples of unemployed workers in the WOTC include:

• Veterans
• Ex-felons
• Supplemental Nutrition Assistance Program (SNAP) recipients
• Those who have experienced unemployment for more than 27 consecutive weeks

The Internal Revenue Service provides complete guidelines on who is eligible. The tax credit has provided over $1 billion in tax relief every year to businesses, and it is  authorized through 2025.

To qualify, an employer obtains certification that the candidate is a member of the targeted group. Using Form 8850, Pre-Screening Notice and Certification Request for the Work Opportunity Credit, they work with their state agency, providing the necessary forms within 28 days after the employee begins work. Look for empowerment zones in your area and target advertising to those locations. You may even be able to work with state agencies, veteran’s assistance groups, or other community organizations to recruit workers.

It will be important for employers to clearly assess their need when hiring someone who has been unemployed for longer than the typical COVID-19 shutdowns. For some, the risks outweigh the benefits; for others, giving a job seeker a chance will pay off in the long term.