When the COVID-19 pandemic broke out in earnest, millions of people lost their jobs or had reduced working hours. A study conducted near the end of May estimated that more than40 million Americans applied for unemployment since March, and millions more sought unemployment benefits in June and July.
The decision of whether to keep employees or let them go has been a difficult one for many businesses. On one hand, the havoc wreaked on the economy by COVID-19 regulations has made consistent pay for workers virtually impossible for many companies. On the other hand, many corporate leaders and business owners feel a deep sense of responsibility for their employees' well-being. In addition, the technical aspects of lay-offs, furloughs, and unemployment benefits have become increasingly complicated as a result of COVID-inspired legislation and rule changes. Everything has changed rapidly and is still in a state of flux. For example, the introduction of new unemployment programs like Pandemic Unemployment Assistance (PUA) has forced local employers to learn about new compliance requirements on the fly, on top of California's unemployment laws.
Nevertheless, with some detailed research (and perhaps some expert assistance from a PEO or another HR outsourcing partner) it is possible to navigate the new requirements happening now. Here are three things you need to know about unemployment and benefits.
1. You May Be Required to Continue Healthcare Coverage
One key factor to keep in mind is that there are significant differences between furloughed employees and laid-off employees. The biggest difference between a furlough and a layoff is that a furloughed worker will eventually return to their job, whereas a laid-off employee may not. It is true that some layoffs are temporary, but others become permanent when management decides that employees will not be recalled to the company.
Another difference between furloughed employees and their laid-off counterparts is that they can keep employer-sponsored health insurance even though they are not currently being paid a salary. Of course, if the furloughed employee decides to keep his current health insurance plan, he is still responsible for paying his share of the contribution, such as his monthly premium and deductible.
While there are many differences between a furlough and a lay-off, one key similarity is that both employees may file for unemployment assistance to cover lost wages.
2. Employers Are Responsible for Communicating COBRA Benefits
If an employee is laid off rather than furloughed, then that worker is no longer eligible for employer-provided health benefits. However, the employer is still responsible for notifying the employee about their rights under theConsolidated Omnibus Budget Reconciliation Act (COBRA).
COBRA allows laid-off employees the option to continue their coverage under employer-provided health insurance. While employees that opt into COBRA coverage do not receive any benefits from their former employer, they can retain coverage if they pay the entire cost of the group plan, plus a 2% administrative fee. COBRA coverage typically lasts up to 18 months after an employee's termination.
After an employee is laid-off, the employer must notify the worker about COBRA benefits. Under normal circumstances, the employer would have90 days to provide a COBRA notice letter to the employee, and the employee would have60 days to inform the plan administrator whether they want to opt-in. However, under new federal guidelines, the clock doesn't begin ticking on employers until after the United States government declares that the national emergency period has ended. Similarly, the grace period for employees will begin after the end of the national emergency and will last for120 days (a 60-day extension, plus the regular 60-day time frame).
Of course, laid-off employees may decide to opt-out of COBRA coverage. In such cases, they can find private health insurance plans on the ACA marketplace, through carriers such as United Healthcare, Blue Cross & Blue Shield, and others.
3. You May Owe PTO Payouts
If your company lays off an employee who has accrued unused vacation time, then you may owe that employee PTO. Laws on this issue vary from state to state. For example, New York legislation permits employers to implement a "use it or lose it" policy, whereas California state law prohibits it. It's important to research your applicable local laws to make sure you stay in compliance.
Of course, if a PTO payout is a well-defined part of your company's policy, then you may owe PTO to your former employees regardless of state law.
How Partnering with a PEO Helps You Navigate Unemployment Laws
In summary, it's evident that in COVID-19's "new normal" employers have more on their plate than ever before. They must keep up with the latest guidelines and regulations related to unemployment and benefits, and quickly adjust their procedures with the introduction of new laws. Of course, more changes will no doubt come with the second CARES Act.
Working with an experienced PEO can help you to stay on top of regulations when it comes to unemployment and benefits. Seeking out a PEO's expertise can save you a lot of time and resources, and ensure that you stay compliant no matter how many changes arise. By working with the right partner, you'll be able to navigate the increasingly complicated realm of unemployment and benefits with ease.