Keeping Employees When Unemployment Pays More

NOW HIRING text over notebook and laptop
Once your loans and cash flow is secured, look to shore up your next most important asset- your people and staffing. Shahril KHMD / Shutterstock

With hundreds of thousands of applications already estimated to have been submitted for the Paycheck Protection Program (PPP) rolling in since last Friday, the focus of businesses will shift to how and what to do with their staff to ensure the loan is forgivable.

A quick reminder again, in order for the PPP loans that are maximized at 2.5 times the monthly payroll, business owners must ensure staffing levels are brought back up to what they were and keep wages within 25% of previous levels. There are more exemptions and calculations that can be made here but let’s follow this general oversimplification rule as it applies to PPP loans.

Employees Can Make More on Unemployment

As stated earlier, employment levels have to be equal to pre-COVID levels and the payout is proportional to the number of full-time employees. While unemployment is skyrocketing to record levels, these same workers one may think they can easily hire back may be less willing to do so.

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Each state sets its own weekly benefit amount which is normally based on the amount of money they were previously earning. According to SavingToInvest.com, the range for maximum payouts can be as low as $235 in Mississippi or as high as $823 in Massachusetts. On top of the state unemployment, part of the CARES Act stimulus package includes $600 in weekly unemployment compensation and will pay retroactively back to March 29th. This has not been funded yet but the federal increase is expected in the next few weeks. Doing the math, an individual filing for unemployment could potentially make a maximum of $835 in Mississipi or $1,423 a week in Boston which is the equivalent of $43,420 to $73,996 a year, respectively. According to the Bureau of Labor Statistics, the average mean salary for NAICS-72 (Accommodation and Food Services) was the following in 2019:

  • Cooks, fast food: $23,510
  • Cooks, restaurants: 28,640 
  • Hotel, motel, and resort desk clerks: $25,850
  • Waiters and waitresses: $26,810

The unemployment bonus of $600 by itself would add up to $31,200 annually, more than any of the average annual wages of any of the above. Granted, some markets like the major cities have higher wages and earning potentials but we are sticking with the national average for now. This unemployment bonus will cease at the end of July but how are employers meant to get their staffing to the correct levels for PPP loans if they are competing against the government payouts? Some states are starting to get reports of workers deciding to stay home for safety reason or to take care of loved ones which is understandable given the circumstances. Normally, there are requirements for unemployment assistant applicants to seek unemployment and are not able to quit their job to receive benefits. This has been waived in most states or modified for the time being. Given how quickly this situation has arisen, local governments are now working on refining eligibility requirements to help employers retain/rehire workers and ensure employees can be safe.

Three Ways to Meet the Employee Threshold

Some politicians have stated that workers would still prefer to be employed then without a job for a number of reasons even if it means receiving less than unemploymnet. Others believe owners will have to be more persuasive and creative as workers are asking for more money and safe work conditions. Walkouts are happening at Whole Foods, InstaCart, Amazon and other businesses as front line workers ask for higher pay and more protective gear. Here are a few reasons employers can help ensure employees would rather work:

  1. Unemployment Could Remain High: The historic level of unemployment we saw in 2019 has completely flip-flopped to the highest levels seen since the Great Depression. It would be naive to think unemployment will not remain elevated when we come out of this pandemic. The unemployment dollars and stimulus will run out and workers should think about their future.
  2. Medical and Other Benefits: The PPP allows any health coverage including premium benefits paid to employees to be included in the loan and the total forgivable amount. This is a major advantage for operations that were already offering these benefits as healthcare is a major concern for the entire nation.
  3. Hire New: The rule requires the number of employees to be the same. It does not require the same employees that were laid off or furloughed to be hired back. Find workers that are not eligible for unemployment or other high-performing staff that you have been looking to add to your team. 

What To Do With Rehired Employees

One major question asked, is how and why would a business bring back employees when it is still mandated to be shut down by the local or state government? What should they have the employees do? The easy answer is have them do nothing in the short term. This program is meant to help keep employees at home, on the payroll, and most importantly- safe. Ensuring workers do not have to put themselves in harms way will make it coming 'back' to work less daunting. 

The idea of bringing workers back to a physical place of work has a number of risk. First, if your place of business is not able to maintain social distancing guidelines, the OSHA risk factor jumps up to ‘medium’ which is the equivalent of working in a medical offices. I'm not sure of many bars and restaurants that can maintain this so make sure you have the updated OSHA COVID flyer visible to your employees and understand your legal and ethical responsibilityes. A business has to provide protecting gear and standard operating procedures that are up to the new normal we live in. Additionally, if any workers are found to be positive for COVID-19, the entire business can be shut down much like two Trader Joe’s locations in New York. 

Have workers stay at home and focus on developing new menus, running social marketing, investing in education, designing music programming, creating customer databases, and other tasks that can done remotely. Create committees and teams that can work virtually over Zoom or Slack to bring the team 'back' together. 

Time will tell how long this goes on for but don't miss out on forgivable loans because you can't find team members. Operators should make sure they have a business employees want to join and if they don't, some time may need to be spent on addressing culture concerns.

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