Making the decision to trim your workforce in challenging economic times is never taken lightly and is probably the hardest decision you will have to make. Before you start the process or make the decision, here are a few steps to help along the way.
For Laid-off Staff
To begin, for any nonprofit employees who file an UI claim and are initially denied because their nonprofit did not pay into the fund, you need to contact the DOL AGAIN and indicate that your employer has failed to report earnings to the IDOL. From what we know you ARE entitled to unemployment benefits and the IDOL will investigate on your behalf. Patience is a virtue and definitely helpful in this situation as they are overwhelmed with UI claims
What does your Contingency Plan State?
First, build your financial contingency plan that includes a total review of your income, expenses, and assets. Click here for a webinar and templates for how we structured ours.
Knowing how much operating reserve/assets you have can be a helpful and comforting feeling.
The Idaho Nonprofit Center board is committed to maintaining our current staffing levels – trimming our workforce would be the last thing on our list. In fact, cutting our workforce did not make the list of cost-cutting strategies. Without my team, the INC cannot serve our nonprofits and right now our mission is more important than ever.
Paycheck Protection Program
Once you know your true financial position – how much in liquid operating expenses you have and how long it can last – start building a cost-savings strategy. If that includes trimming your workforce, consider applying for a Paycheck Protection Program (PPP) loan through the SBA before you do anything else. Call your lender today. The application and verification process is relatively simple and most, if not all, of the loan will be turned into a grant. Consider this as an option to keep your staff employed.
Unemployment Benefit Obligations
While nonprofits are not required to pay into the state Unemployment Insurance Fund, that does NOT exempt you from paying UI benefits to employees. Here’s a great guide to UI (unemployment insurance) in Idaho from the Idaho Department of Labor.
If you do not participate in the state unemployment insurance fund AND you lay off staff, you are still responsible for paying their benefits out of your “own pocket”, so to speak. In other words, make sure you’re covered by UI or you might not be “saving” yourself much money by trimming your staff.
There are two ways nonprofits can deal with UI. There’s the experience rate (which is what we use) or cost reimbursement. Here’s the difference:
Experience Rate vs. Cost Reimbursement*
Experience-rated employers are assigned a tax rate annually. The current tax array can be viewed online on the DOL e-services website. Continue to the Unemployment Tax Rates webpage to view the current tax array tables (find the 2020 here). The standard rate will be assigned until the employer has paid taxes to the Employment Security Fund for at least six calendar quarters prior to the yearly computation date of June 30.
The employer will then be assigned a rate based on the employer’s own experience record and its relationship to the experience record of all other covered employers registered with the Idaho Department of Labor.
Cost reimbursement is another method of paying unemployment insurance tax. It is available to certain nonprofit organizations that qualify for exemption under the provisions of Internal Revenue Code 501(c)(3) and to all governmental entities including public school districts and Indian tribal business as detailed in the next paragraph.
Under this method, employers reimburse the state for the actual cost of unemployment insurance benefits paid. A cost-reimbursement employer will be billed for its proportionate share of a claimant’s benefits based on the percentage of wages paid in the base period. This applies regardless of the reason for the claimant’s separation from the job.
Additional information on Cost Reimbursement options for 501-c-3 organizations:
Governmental units, Indian tribal business and nonprofit organizations as defined in the Internal Revenue Code (IRC) 501(c)(3) are covered employers and are required to report wages for Idaho unemployment insurance purposes. These employers may be able to report either as regular experience-rated employers or as cost-reimbursement employers.
Cost-reimbursement employers have two options for reimbursing the state for benefits paid:
An employee at the IDOL, who is knowledgeable about these differences, says:
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