Jamie Black-Lewis owns two spas that had to close due to Coronavirus shutdowns. Like many other small business owners, she applied for and received a loan under the Payroll Protection Plan. In order to be forgivable, she needs her employees to come back to work and to use most of that money on payroll.
They don't want to come back to work.
Why? They make more money with unemployment than they do with their regular paychecks.
But, it's more complicated than that. Here's what you should know about why employees don't want to come back.
Spa services are tipped services and Black-Lewis's spas are closed. While there's probably plenty of work to be done, there aren't any tipping customers.
How much income do spa employees normally receive as tips? While we don't have figures for these locations, the average tip is between 10 and 15 percent, while some salons see higher figures. That can make up a significant portion of income.
In other words, asking employees to come back isn't bringing them back to their old paycheck but to their old flat rate--which is below their normal income. So, it's not even a question of making more money on unemployment--they also make less working when the business is closed than they would when it is opened.
Please note, however, that if a business normally takes the tip credit and pays employees at a lower than minimum wage ($2.13 federally), the business must pay them at least the minimum wage ($7.25 federally). That does not make up for what they can receive on unemployment.
Tipped people aren't the only people whose base rate doesn't make up all their income. And, in many cases, it's only a small portion. M. Proulx explained on Facebook what that meant for a car salesperson. Her car salesman husband earns $13.40 an hour as base pay and makes $1000-$2000 a week in commission. The dealership is only selling about one car per week, with 20 salespeople, compared to the 20 cars per month per salesperson in normal times.
Why on earth would an employee want to give up the $600 a week from the federal bonus and the state unemployment to earn a fraction of what they would normally?
Many other salespeople are in the same boat. If there are no buyers, the company owners may want to keep everyone working so they can use the extra money for overhead, but it's no win for the employees.
Fear of coming back
It's not like getting a regular job--there are genuine fears of infection. Coming back to work can seem like a death sentence if you have risk factors or have family members that do. To add to it, coming back for less money than you receive from unemployment seems even worse and downright foolish.
It's just more money
Some people are just flat out getting more money with state unemployment plus the federal subsidy than they will ever earn working for your company. It doesn't make them horrible for not wanting to come back.
Ultimately, with so many factors to consider, do yourself and your employees a favor and do what's best for all of your company's stakeholders.