SMB owners across the country face a challenge on whether to bring workers back or allow them to reap short-term unemployment insurance benefits.
Here's what you need to know:
- Business owners are wondering whether or not to let staff members continue to collect UI that may net more money on a weekly basis than they would normally earn on the job
- For staff members who are called to return to work, UI benefits may be lost if they refuse and are not covered under the COVID-19 qualifications
- Consider whether or not your business has the luxury of letting workers stay home. If your SMB will be negatively impacted if eligible staffers don’t return to work, the damage could be long-term
- Bringing back staffers (who do not qualify for a COVID-19 exception) on a part-time basis may be a helpful solution
- Employees with a reduction in hours may still qualify for state benefits
As states ease their shutdown mandates and businesses begin to reopen their doors, many small and medium-sized business owners have concern about calling workers back to the job.
Amy Hyde, director of operations at Outspoken Media, has already started the rehiring process after laying off 3 employees due to COVID-19.
“One team member rejoined our staff mid-April,” Hyde said. “However, we were surprised to hear that a former marketing assistant was in no rush to rejoin or look for work due to the variance between salary as a full-time employee and earnings from unemployment.”
This has prompted Hyde and her team to rethink their recruitment strategy if the employee chooses not to come back.
The question has practical and ethical implications. Some workers who were laid off or saw reduced hours were able to apply for state-provided unemployment benefits immediately. Beginning March 29, the federal government — under the Pandemic Unemployment Assistance (PUA) section of the Coronavirus Aid, Relief, and Economic Security (CARES) Act — provided workers an additional $600 per week in unemployment benefits.
For some workers, that additional funding may amount to more than their regular salary. The PUA benefit will be in place for workers collecting unemployment insurance through July 25, 2020, with a cap of $10,000 per employee. The Act also extends regular state UI from 26 weeks to up 39 weeks total.
The Pandemic Emergency Unemployment Compensation (PEUC) part of the Act also provides up to 13 weeks of additional unemployment benefits to workers who had previously collected state or federal UI payments but who had already exhausted their benefits.
Rejecting work could jeopardize unemployment benefits
With unemployment at unprecedented highs due to the pandemic — jobless claims topped 30 million this past week — it’s a difficult choice for many.
For some workers, staying home is a more lucrative option, at least for now. The challenge for many will be determining if they should reap the short-term benefits and stay home. This may seem attractive, but they run the risk of losing their job permanently, or even losing their benefits, if they receive a call to return work but refuse.
Michael Mason owns a video production company in Austin, Texas. He said employees know unemployment benefits are finite, but rejecting work could disqualify them for future payments.
Plus, “they’re all sick of being at home.”
The challenge for SMB owners may be to determine whether or not these short-term benefits for employees outweigh the company’s need to re-staff and restart their business.
Michael Alexis, CEO of Team Building, said his company has rehired a number of employees since initial layoffs.
“One strategy that has worked well for us is offering flexible positions, for example part-time hours or similar,” he said. “We work with smart, motivated, hard working people that want to be working both to support themselves and the organization.”
He added they offer health insurance and other benefits for employees, which they wouldn’t get on unemployment.
Who qualifies for the additional benefit?
The PUA provides guidance on who is a “covered individual” eligible to collect federal unemployment benefits. State requirements may also be at play, but will typically be more lenient than federal guidelines. Under the COVID-19 qualifying reasons for benefits, the worker must be directly impacted by the virus to qualify for state and/or federal benefits. They must be available to work (although the requirement to “actively seek” work is waived); not be collecting sick leave or any other paid benefit; and must meet one of the COVID-19 qualifying reasons:
- Diagnosed with COVID-19 or experiencing symptoms of COVID-19 and seeking medical diagnosis
- Been advised by a healthcare provider to self-quarantine due to COVID-19 concerns
- Is caring for a member of their household diagnosed with COVID-19
- Is caring for a child (other individual in the household unable to care for themselves) who cannot attend school or facility care due to COVID-19 shutdowns
- Mandated local quarantine makes it impossible to reach the place of employment
- They have become the primary earner or major support of their household because their previous head of household has died from COVID-19
Who is disqualified for unemployment insurance benefits?
For staff members who receive a call to return to work, they may lose unemployment benefits if they refuse and don’t have coverage under the COVID-19 qualifications. Staff members should notify their employer of the reason they cannot return to work when called. If the reason to stay home does not qualify, states have a mechanism for businesses to report workers who have been called back but refuse to return to work.
In most states, unless it’s for a legitimate COVID-19-related reason, the refusal to return to work when called will disqualify the employee from continuing to collect unemployment. Employers will need to notify staff members who refuse to return to work (who do not provide a legitimate COVID-19 exception) that they will notify their state unemployment office of the refusal. Simple fear of COVID-19 is not a legitimate reason to refuse work in most states. It’s important to check with your state’s guidelines before you make any notifications to staffers.
An option to consider
Most SMB owners are well aware of the financial challenges their employees face. This pandemic has put almost everyone in a difficult position. They may worry about the ethics of letting employees stay on unemployment benefits for the short-term, to the detriment of long-term recovery for their organization.
If the decision is too difficult, bringing back staffers who do not qualify for a COVID-19 exception on a part-time basis may be the answer. Employees with a reduction in hours may still qualify for state benefits, which will automatically include the additional $600 in PUA funding. It might be a good idea to remind staffers that all unemployment benefits are taxable income, including the additional $600 paid through the federal program. The increase could put them in a higher, and more highly-taxed, tax bracket. This is something to consider when deciding whether or not to return to work.