COVID-19 Relief Policies Should Help American Workers Stay Connected to Their Employers

The Families First Coronavirus Response Act requires companies with 500 or fewer employees to provide emergency paid sick and family leave, with the cost to the employer offset by a refundable tax credit. The Act allows workers to take two weeks (80 hours) of paid sick leave for COVID-19 related symptoms or reasons. The Act also allows parents to take up to 10 weeks of paid family leave if they need to stay home because of school closures. Both these options—emergency paid sick and family leave—can help employers keep their employees on the payroll during these uncertain times of social distancing.  

Congress also expanded unemployment insurance (UI). The CARES Act creates three new UI programs: Pandemic Unemployment Assistance (PUA), Pandemic Unemployment Compensation (PUC), and Pandemic Emergency Unemployment Compensation (PEUC). We focus on PUA here as a key mechanism to help employees stay connected to their employer. PUA provides a federal increase of $600 per week of state unemployment benefits to workers and expands who is eligible for UI benefits. For example, workers who are furloughed or individuals working part-time are eligible. Depending on how a state calculates unemployment insurance payments, it may also be possible for workers with reduced hours or reduced pay to receive UI benefits. Gig and self-employed workers, independent contractors, and freelancers are also eligible.  

Encouraging employers to furlough employees has several benefits. First, employers can continue to pay an employee’s health benefits, Second, employers will spend less time and money rebuilding their workforce once they are back in business. Large companies like Gap, Kohl’s, and Macy’s announced that they are opting to furlough workers for these reasons. The CARES Act also modified short-time compensation (STC) programs, also known as work-sharing, which helps employers avoid layoffs by putting workers on part-time schedules with partial unemployment benefits to help make up for some of the lost income. Under the Act, states with short-time compensation laws can receive 100 percent of the costs incurred for providing benefits for part-time workers through December 31, 2020. States without short-time compensation laws can receive up to 50 percent of the costs incurred for paying these benefits. The Act also provides $100 million in grants to states to implement, improve, and promote STC programs. 

Under the Paycheck Protection Program businesses with fewer than 500 employees, including eligible nonprofit organizations, veteran organizations, tribal businesses, hotels, and restaurant chains are eligible for federally guaranteed loans to cover their payroll, benefits, rent, and utilities for up to eight weeks. The loan is fully forgiven if employees remain on payroll for eight weeks and their wages are not reduced by more than 25 percent. If the company must still lay off employees after receiving the loan, the amount of loan forgiveness diminishes but can be reapplied if the company is able to hire back the same number of employees by June 30, 2020.  

While these provisions are all intended to help retain employee-employer connections, there are concerns that some of these efforts could have the unintended consequence of disincentivizing workers from remaining attached to an employer. For example, while the additional $600 per week add-on to UI is much needed by many workers, it is equivalent to $15 per hour for full-time employees which is more than 42 percent of workers were making. So, one major question is whether—in the context of an economic crisis that is subordinate to an epidemiological crisis—unemployment benefits that compensate low-wage workers better than their job is a feature or a bug. As workers and employers struggle to meet the current crisis caused by COVID-19, BPC looks forward to working with Congress, small businesses, and other stakeholders to raise incentives for work, support employee-employer attachment, and provide the emergency support that many Americans need in this moment of national crisis.