The executive order is set to replace the CARES Act.
You’ve probably seen the headlines—some covering the roadblocks this order could face—so we won’t spend too much time here. The most relevant point related to the labor market is this: The executive order does not include one-time stimulus checks for employed and unemployed individuals (they were up to $1,200 under the CARES Act and could reappear in new legislation), and the weekly unemployment assistance decreases by one-third.
The unemployment assistance would drop from $600 per week to $400 per week.
This could be significant. That’s $800 less per month. While individuals could live comfortably on federal and state unemployment under the CARES Act (making the equivalent of around $50,000 per year in some states) it would be slightly more difficult under the executive order. The $400 weekly checks for qualified individuals would run through early December or until federal and state funds run dry. (The order mandates that the Department of Homeland Security’s Disaster Relief Fund would cover 75% of the weekly checks, and that states’ Coronavirus Relief Funds would cover the remaining 25%.)
A payroll tax deferral could become a tax cut.
The order calls for a payroll tax deferral for workers who make $4,000 or less every two weeks, meaning the amount that the federal government normally removes from workers’ checks to pay for medicare and social security would not be removed from September 1 to December 31 of this year. Without the power to implement an actual cut, the President is relying on Congress to make the tax deferral a tax cut. The latter is far more appealing because workers would be completely forgiven of those taxes (roughly 8% of their income) for four months, instead of owing them later. While this could become a selling point for employers looking to hire, whether or not it comes to fruition is difficult to predict.
More people could re-enter the workforce, albeit slowly and with new expectations.
Even though there are suddenly millions of unemployed Americans with moderately less financial assistance, we don’t anticipate an immediate, mass influx of job candidates; in fact, we expect a slow ripple. While tens of thousands might begin their job searches soon in order to get ahead of the competition, millions more will assess their new financial situation to see if they can continue to pay their bills and look out for their well-being over the next few months.
You must pay competitively, at a bare minimum, and offer creative perks.
Today, competitive pay is imperative, and generous pay is ideal. The vast majority of candidates will only accept offers that compensate them more than total unemployment. Yes, with weekly unemployment likely to decrease by one-third, that pay threshold is lower, but still tricky to absorb—especially for companies that have historically paid average rates in their markets. Here at Adecco, we have hundreds of conversations about it on a daily basis—mostly with blue collar candidates who are unemployed, can’t work remotely, and have a higher risk of being exposed. They will continue to have leverage and be selective with job offers as long as they can receive unemployment assistance.
We’ve worked with many clients to find the right balance and raise associate rates to appropriate levels. Per Sara Gordon, our Head of Account Management for National Accounts, “Clients are using a number of different pay strategies to entice and retain workers. In addition to $2 to $5 per hour increases to base pay, we’re also seeing clients offer significant weekly bonuses for perfect attendance.”
Per our own internal client data from February to March, or March to April—when COVID intensified in the U.S. and the CARES Act passed—we saw average hourly pay rates for certain positions (forklift driver, cashier, light industrial roles, customer service representative, healthcare roles, etc.) rise from roughly 5% on the low end to over 30% on the high end. While this was encouraging initially and made for more effective recruiting, the average pay rates have since leveled off, and we’re seeing more inconsistencies. Regardless of this recent historical data, it remains critical to examine your rates and implement an aggressive pay strategy.
To see how much income unemployed individuals in each state would have under the executive order—and help your business determine how much you might have to pay job candidates in order to hire them—see the chart below this article.
Many of these potential job candidates are worried about workplace safety.
Can you blame workers for being worried about their health in today’s climate? There are countless stories in which employers and employees are at odds over workplace safety. To their credit, you have employers setting new standards, including adhering to OSHA’s recommendations—installing shields, separating entrances and exits, taking temperatures, and more—but you also have employees questioning whether it’s enough to protect them from COVID, wondering if they should apply for unemployment benefits and stay home. It’s a dynamic sure to continue until the pandemic relents.
Executive order aside, your business must promote and provide the safest environment possible.
The amount of money offered in any stimulus package doesn’t change this. Educate your staff so that they’re relaying a consistent message. Include details in your job posts. Make it an integral part of your onboarding experience. And, most importantly, visibly enforce it on a daily basis so that it builds trust among your workforce. One of our clients recently said it best, “They see when they go into a breakroom, half the tables are there… all of those visual cues and signs just help them with a level of trust.”
COVID-19’s presence and the government’s response to the virus is fluid. A couple of months ago, we discussed the CARES Act. Now, it’s President Trump’s executive order. Initially, only essential services industries were growing; now, there is moderate optimism for non-essential services. And three, four, five months from now, the conversation will surely take another turn. Whatever the case, your business and your staffing partner must remain adaptable and quick to react to economic conditions if you plan to land the talent you need.
To assess your company’s current pay rates and determine how they’re affecting your recruiting and hiring efforts during this time of unprecedented unemployment assistance, connect with us:
Adecco Clients – Reach out to your client services team.
All Other Employers – Contact us via our website.
An Individual’s Potential Weekly and Hourly Earnings by State under the Executive Order:
|State||State Unemployment||Executive Order||Weekly Amount||Hourly Amount|