Answers to Unemployment Questions Raised by COVID-19
E-mployment Alert March 19, 2020
First, it was bars and restaurants. Then, Ohio closed all movie theaters, fitness centers, gyms, bowling alleys, and other recreation facilities. This string of closures has left many wondering what’s next. Other states, such as Pennsylvania, have ordered the shutdown of all “non-essential” businesses, which would include hair and nail salons, casinos, liquor stores, golf courses, and retail. This would also presumably require at-home work for other types of business, such as insurance brokers, financial advisors, engineers, architects, and the like.
As more and more businesses plan for whatever comes next, including potential closures and layoffs, we’ve noticed an increase in the number of unemployment-related questions we’re receiving. As we explained here, Ohio has relaxed some of its unemployment eligibility requirements in light of COVID-19. As a result, many of our employers are considering whether unemployment is an option for their workforce and how to best structure remaining crews to maximize the benefits to employees.
Unemployment is available to employees who are wholly or partially unemployed through no fault of their own. This means that even employees who continue to work during the coronavirus crisis, but who experience a decrease in hours, can apply. One important consideration for employers when deciding on shifts is how your schedule will impact your employees’ unemployment payments. If you are trying to decide between a skeleton crew and rotating schedule, and you should understand how both could impact unemployment calculations.
Unemployment benefits, unfortunately, are not simply the amount the employee made prelayoff. Instead, benefits are capped depending on the employee’s number of dependents. For those with zero dependents, the maximum unemployment will pay per week is $480. One or two dependents increases this maximum to $582. Three or more dependents will qualify an employee for up to $647 per week. A wholly unemployed individual can expect to receive half of their average weekly amount up to the applicable maximum above. If an employee is partially employed, Ohio exempts the first 20% of his or her weekly wages before a deduction is made. In other words, the employee’s benefit amount will be reduced by only 80% of his or her earnings for that week.
Perhaps these complicated calculations are best explained by way of example. Imagine one of your employees typically works 40 hours a week, receives $500/week in compensation, and has no dependents. If you layoff the employee completely, they can expect $250 in unemployment per week (half of their weekly wages). If instead this employee made $1,000 per week, they would qualify for $480 in unemployment benefits (the maximum allowed for their dependent category). Now, let’s assume that instead of laying off the employee, you reduce his or her hours to 20 per week. Then, the individual would earn $250 as wages and still qualify for $50 in unemployment compensation after an earnings deduction ($250 benefit amount less $200, or 80% of their earnings for that week), for a total of $300 per week.
Now, let’s consider a second employee. If both work a reduced, 20-hour week, each will make $600 over a two-week period ($300 per week as described above). Alternatively, you could rotate the two employees, meaning one employee will work a full 40 hours one week while the other is off, then the two will switch. In this example, each employee will make $750 over the course of two weeks: their full $500 in wages for the working week, and their full $250 in unemployment benefits during the off week.
It’s important to notice that, while partial unemployment may increase an employee’s pay during a single week, their total compensation may actually be greater over the course of your closure if they qualify for total unemployment. Ohio has mutualized the cost of unemployment for the foreseeable future, meaning that taking advantage of this benefit will not increase your tax rate. ODJFS also just released a new mass layoff form for Ohio employers to provide to their employees for use in the application process. That form can be accessed here.