How unemployment works

The word “unemployed” has many definitions, but I’ll focus on three of them. One: the layperson believes someone is unemployed if they are not working. Two: the data analyst or survey taker considers a person unemployed if they are not working but have been actively seeking work for some specified amount of time. And three: the unemployment insurance system provides short-term financial assistance for eligible unemployed persons.

Unemployment benefits are not the same as “welfare.” A person’s current financial condition and family situation does not sufficiently determine eligibility. Instead, unemployment is an insurance system, and some people pay in so some (other) people can get payouts.

The system is a joint state-federal program administered by the states. The state (generally) determines eligibility, benefit amounts, and the tax rate (like an insurance premium) that must be paid into the system. Some states are more generous than others.

Now, who pays the insurance premia? Employers. As a business owner with employees, I pay a percentage of payroll into the unemployment insurance system. By paying into the system, I’m doing my part to make sure that if my employees get laid off (lose their jobs through no fault of their own) they will have some assistance while they look for other work or while they wait for recall to my company.

Some companies hire employees, some hire independent contractors (ICs). I’m not going to get into all of the differences now, but employers who hire only ICs have not done their workers any favors for this current pandemic. See, no one pays unemployment insurance for ICs. An IC who applies for benefits wants something for nothing. If you work for someone who pays you with checks and you get a 1099 for taxes, they haven’t paid into unemployment on your behalf.

If you work for yourself, and just cash checks as they come to you, without paying UI taxes, you have not paid into the system. When applying for benefits, you are asking something for nothing.

Of course, COVID-19 has flung us into a truly unusual situation. Many self-employed people are unable to earn money from work through no fault of their own. And this is where the CARES Act comes in. We needed a special appropriation in order to pay benefits yo people who have not paid into the system.

FWIW, I am an employee of my corporation and pay payroll taxes and UI taxes on my wages, just as I do for all of my employees. Frankly, it’s the right thing to do, and there are a lot of business owners out there who choose to pay themselves and others as ICs when they could be employees. And why do it that way? To avoid paying payroll taxes, workers comp insurance, and UI taxes. To avoid contributing to the safety net that so many Americans need right now.

For example, if I pay an employee $15 per hour, I pay an additional $1.15 for Social Security and Medicare, $1.97 for liability and worker’s compensation insurance, and $0.38 into the unemployment system. I also pay for a payroll service and I offer benefits like paid sick leave and professional development funds. So every $15 hourly wage costs me about $20. Lots of employers choose not to pay that. For shame.

Do you have questions about unemployment? Feel free to ask me, I’ll do my best to answer.

Feeling, safe

I have been trying to pen a message for so many days, I’ve lost count. What day is it today, anyway? Tuesday? Friday?

I need to provide my clients a professional update about the business and talk about details, when all I can think about are feelings and data and justice.

hands holding a tree

Yes, technically, EFTE operates in industries that are allowed to continue working right now. Even though industry groups and political leaders have instructed us to do site work only for emergency issues, “emergency” is self-defined, and often stretched.

The truth is, we’d rather be working in your gardens, woodlands, trees, and yards right now. A few weeks ago I was in the process of hiring three new employees. Instead, I shuttered site operations and instructed my manager to apply for unemployment compensation. One of the main reasons I created this business was because I wanted to provide good jobs, so this closure leaves me gutted.

While it may seem that our work is “safe,” crew members nonetheless are at risk whenever visiting a client’s property, when gathering tools from our storage, when purchasing equipment and materials, when filling their gas tanks. And frankly, EFTE does not own enough tools to have one of every lopper, pole pruner, hard rake, chain saw, mattock, wheelbarrow, and heavy spade for every crew member, so we have to share. Sharing is really risky right now.  I cannot bear the thought of one of my employees contracting the virus during work. And as we’ve seen with healthcare workers, even taking precautions is no guarantee.

If we followed the ISA/TCIA guidelines to the letter, we would only do emergency jobs, but that is not enough work to keep our crew going. And I have yet to discover how many hours I could pay an employee that would enable her to keep receiving unemployment checks. Is three hours writing a newsletter too many? But I shouldn’t get ahead of myself. Even if I want to do that, I don’t have the money to pay for it. Instead, I have the early season expenses like renewing insurance and web hosting and did I mention our truck needs new tires? 

So I sit at my desk for a few hours, trying to be productive, applying for assistance, realizing that I don’t qualify for most of it. And no, I won’t put my house up for collateral on a business loan right now. Nobody should have to do that.

I open my email, make myself read a message or two, then realize how overwhelmed and distraught I feel, so I get up from my desk and wander to the basement, cobbling projects together from bits of scrap wood and old paint. I pass the time saying hello to my tomato and pepper seedlings. What else am I supposed to do right now? No, don’t tell me, I know the answers, I know the list. I have it in a couple evernote notes and on a cork board on the wall and in a post-it note array on an oversized clipboard on the floor, and on a daily schedule on my desk. I write in lunch over two 15-minute slots, just to give myself permission to do only that for a half hour. But that’s done and now is the next slot. I should fill it in with something.