CA Employers: Is partial employment the answer?

I’m receiving calls about unemployment benefits and California’s Work Share Program administered by California’s Employment Development Department (EDD). Clients are curious if this is the right solution for them during a temporary financial hardship, such as the pandemic we are dealing with today. Is partial employment the solution? Well, the answer is…maybe.

The WorkShare program is designed to provide partial unemployment to employees whose schedules and payroll are reduced by their employer. The goal of the program is to provide some unemployment insurance (UI) for the lost wages and to avoid organization-wide layoffs.

For many Bay Area clients, particularly those with higher compensation levels, the program may not provide a benefit. In general, if the pay an employee receives via payroll is equal to our exceeds the anticipated claim amount from the EDD, then the EDD will not pay.

Here's a fictitious example:

Employee earns $120,000/year or $2308/week

Employee's pay reduced by 50% to $1154/week

Employee's maximum weekly unemployment per WorkShare is $600/week (determined by EDD)

$1154 > $600

Employee receives $0

In this scenario, even at 50% FTE, the employee is earning more than the maximum ($600/week) benefit allowed under unemployment insurance.

For clients trying to extend their runway, I recommend looking at other compensation levers available to them such as stock options or future bonuses to retain their key staff in exchange for a temporary period of reduced compensation. These alternatives can be designed with vesting schedules and other requirements which mean organizations can reward the employees that weather the storm with them. That is a win-win for the employer and the employee.