The CARES Act includes a provision for paying an extra $600 per week unemployment benefit (Pandemic Unemployment Compensation) to eligible employees who are furloughed or laid off as a direct result of COVID-19.\u00a0 For many workers, this means that the unemployment benefits will exceed their previous wages.<\/p>\n
Consider two examples of workers who were laid off due to COVID-19 in the state of California.\u00a0\u00a0Let\u2019s assume one worker was working full-time and earning $12 per hour and the other worker, also working full-time, was earning $20 per hour.\u00a0 To simplify the calculation, let\u2019s assume both workers received the same pay rate for the previous five quarters.\u00a0 Here are the results:<\/p>\n
Hourly Wage\u00a0\u00a0\u00a0\u00a0\u00a0 Equivalent Hourly Unemployment Benefit
\n$12.00\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 $21.00
\n$20.00\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 $25.00<\/p>\n
For those trying to restart their businesses, how can they recall their employees when their unemployment benefits are greater than their wages?\u00a0 Jon Hyman* describes two options, the carrot and the stick.<\/p>\n
Stick<\/u>
\nYou can advise your employees that if they refuse to return to work you will ask the state to terminate their unemployment benefits<\/p>\n
Carrot<\/u>
\nProvide a financial incentive such as temporary hazard pay or return-to-work incentive bonus.<\/p>\n
And a combination of carrot and stick could be used.\u00a0 The Pandemic Unemployment Compensation is due to expire at the end of July 2020, although the Democratic side of the House has proposed extending the benefit through December 2020.<\/p>\n