PPP forgiveness rules and state unemployment experience ratings make it worth your while to at least try to bring back as much staff as possible.
If you're having trouble deciding what to do with your PPP funds, the following information may help you maximize loan forgiveness and minimize a future hit to your state unemployment experience rating. Here's why:
A. PPP forgiveness rules are such that you benefit from just making a re-employment offer, even if the person declines to return to work.
B. Most State Unemployment Experience Ratings will be affected by COVID-19 related layoffs (including New York and California).
Most states are not currently offering experience rating forgiveness for pandemic-related unemployment claims. Experience ratings are reassessed in the 4th quarter of each calendar year with an effective date of January 1 of the upcoming year. If you have laid off or furloughed staff, you can mitigate your company's 2021 increase by taking the following measures that also benefit you for PPP forgiveness purposes:
1. Use your PPP funds to get as many people off unemployment as quickly and for as long as possible. Even if they decline the offer, you will still benefit when it comes time to apply for loan forgiveness. If you make a written offer to someone and you can document that they declined, the amount you would have paid them won't be counted against you when your labor expenditure is calculated for forgiveness purposes. If the person's old job is not available, you can ask them to return in a different role.
2. Implement a Shared Work Program. Contact the State's labor department to get more information on eligibility, development, and certification ( https://dol.ny.gov/shared-work-employer-eligibility-and-application). This program allows you to bring back employees at reduced hours and be absolved of liability for their partial unemployment claims. Employees working under this program can take home more pay and still be eligible for partial unemployment benefits. People who are collecting partial unemployment benefits are still able to take advantage of the $600 weekly CARES Act benefit. Unemployment benefits paid to employees working under this program will not be counted towards your 2021 experience rating because this program is federally funded, so the State doesn't have an interest in the expenditure.
3. Contest unemployment claims for people who have declined to come back to work or were terminated for non-COVID reasons. Most people are obligated to accept your job offer, even if they don't like it. There are certain protected groups of people who are an exception to this rule, mainly high-risk individuals and those who have to care for children whose school or childcare has been cancelled. For almost everyone else, they will be kicked off of unemployment if they decline your offer and the State learns about it.
If you think you're dealing with a person who fits into the exception, speak to a Human Resources or legal professional for further guidance.
You can check which of your employees have filed unemployment claims by using your state's E-SIDES system. For more information on how to log into this, visit your state's department of labor website. If you are a KitchenSync HR client, our team can also manage this process with minimal assistance from you.
4. Prioritize rehiring your most valuable employees and let them know it's not a punishment. Know the pitfalls of clinging to unemployment benefits so you can help your employees make an informed decision on whether to return. Here's the shortlist of why it would be wise to get back to work sooner than later:
- The $600 CARES Act weekly subsidy expires on July 31 and probably will not be renewed. After that, the maximum weekly unemployment benefit will be reduced to state levels. For example, New York's maximum is $504 and California's is $450.
- In New York, for example, a minimum wage employee previously working 40 hours per week would only be taking home around $300 in weekly unemployment benefits after July 31. To get the maximum benefit, a person would have to have made at least $52,000 over the course of the previous year.
- As we get closer to July 31, more people will be applying for less jobs. Anyone who declines an offer now is risking being shut out of the job market in the long term. Restaurants will be among the last businesses allowed to return to normal operations and even when that does happen, many will find that they are able to operate just fine with a slimmed down staff. Returning to work now is an investment in the employee's future.
Ultimately, your business needs to protect its own financial future by complying with PPP forgiveness rules and employment reporting requirements. Increased unemployment experience ratings are a hidden risk because your company won't see the full monetary effect for another seven months. If left unchecked, you could be looking at an increase of tens of thousands of dollars in unemployment tax over the course of 2021.