A Different Kind of Unemployment Compensation
In 2021, President Biden intends to focus on each state’s use of short-term compensation and work-sharing programs, which result in employers staying afloat while employees maintain their employment status. Employees do end up working fewer hours compensated by their employer, but the federal government then makes up the difference in the normal full-time wages. Rather than separate from employment, employees keep their salaries and benefits, with employer-provided health care benefits of particular importance during the Covid-19 pandemic, even if employers must reduce hours worked.
Federal initiatives for Unemployment Insurance changes are as follows:
1. Funding assistance from the Federal Government
- The federal government will assist with funding short-term unemployment compensation.
- Each state must pay for short-term compensation programs.
2. All 50 states to Establish short-term compensation programs
- Only 27 states currently have short-term compensation programs. Florida is one of these 27 states, with information available specifically for both employers and employees.
- Biden wants all 50 states, plus Washington, D.C., Puerto Rico, and the U.S. Virgin Islands to establish short-term compensation programs.
- Conditioned assistance and incentives for states will be provided to implement short-term compensation.
3. Employer tax credit provisions
- Employers usually prefer layoffs over employee retention during economic distress.
- Companies experiencing financial distress may not be able to afford paying certain employees and to provide health care coverage.
- Biden will support a refundable tax credit to cover their incremental cost of full health care coverage when employees face reduced hours. This is to inspire businesses and non-profits to retain employees.
4. Increased caps on work hour reductions
- Most states have limits on the amount of work-hour reductions permissible (e.g., 40% – 60%) to qualify for short-term compensation.
- Companies may need to reduce work hours more drastically or otherwise may choose to layoff employees.
- Biden wants to raise the cap to 80% work-hour reductions and even provide waivers in extreme circumstances to help employers and to save jobs.
5. Extend Unemployment Insurance Automatically
- Unemployment Insurance and short-term compensation will be extended automatically.
- These automatic triggers would be tied to “economic and public health conditions”.
- In doing this, there will be no delay with the provision while waiting for Congress to pass a stimulus package for unemployment benefits.
