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Partial Unemployment Benefits for Hour and Pay Cuts

unemployment claim form on an office table

Most people probably aren’t even aware that such a thing as partial unemployment benefits even exist but, in fact, unemployment benefits aren’t so black and white – lose your job, get assistance. There are benefits available for employees whose hours are cut or whose pay is decreased as well and, as a business owner, you should know this.

Eligibility for Partial Benefits

Eligibility for partial unemployment differs by state. Some of the general requirements, however, are listed here.

  • Employees must be underemployed through no fault of their own – in other words, their hours must have been cut by their employer and not at the employee’s own request.
  • The employee must be willing to work full time and looking for work. Going back to school after having one’s hours reduced would nullify eligibility.
  • Employees could be eligible if after losing their job they were only able to find part time work.

Where the Unemployment Funds Come From

The Department of Labor’s unemployment insurance program is funded through the unemployment tax that employers pay as a part of their payroll taxes. It’s an insurance or tax that is paid regardless of whether the employer ever employs people that use the benefit. Like most insurance premiums, we may never use the benefits but we have to pay them anyway to support the collective need. For more details, read this article on eligibility.com.

How Unemployment Claims Impact Employers

When employees claim these benefits, employers could start paying higher employment taxes due to an increase in their unemployment insurance tax. It’s similar to car insurance rates which rise when you make a claim. The more employees that are laid off by an employer who claim unemployment, the higher the employer’s rate will be. Partial unemployment claims also affect the unemployment insurance tax rates.

Avoid Cutting Hours and Pay

To avoid increases in employment tax rates, great care should be taken to hire good people and to avoid layoffs, pay cuts, and reducing hours.

Of course, these things can’t always be avoided. Companies go through periods of hardship where pay cuts and layoffs are inevitable. Sometimes employers reduce a troublesome employee’s hours in hopes that the employee will resign. It’s a reasonable strategy for avoiding legal difficulties but it could mean that the employee starts collecting unemployment benefits. That’s one of many reasons why good hiring strategies and retention efforts are important for employers. It helps keep costs down in the long run.

There are all sorts of reasons that employees don’t work out or don’t work out in the way initially hired. Many of them are inevitable. But by offering a good company culture, decent working conditions, amicable management, living wages, and even severance packages, many issues can be avoided.

Being aware of where the unemployment money comes from and when employees can collect it can help employers make better business decisions and avoid most unemployment claims.

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