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I was recently asked, “Are church employees eligible for unemployment benefits?”
It is an interesting question because a lot of people don’t realize that “ Churches and religious organizations are not liable for FUTA Tax.”
Let’s start by explaining what unemployment benefits are and who is eligible for them.
Who Is Eligible For Unemployment Benefits?
Unemployment benefits are available to workers who lose their jobs involuntarily because of reasons out of their control and meet basic state law eligibility requirements.
Unemployment benefits are administered at the state level and offer temporary financial help to workers who have lost their jobs and meet state law requirements.
Eligibility, unemployment benefit amounts – and the length of time the benefits are available are determined state-by-state.
Most states fund the benefit by imposing an unemployment tax on employers – this is the tax that churches are exempt from.
States are not required to cover ministers or employees of churches or organizations operated and controlled by a church or religious organization.
This includes church-run schools, conventions, or associations of churches operated for religious purposes.
Employee Notice
Because these exempt organizations do not pay the state for unemployment benefits, many states require written notice to be made to employees upon employment.
The written notice is meant to notify employees that wages earned will not be used to determine unemployment benefits.
This can be done during new employee orientation and incorporated into the employee orientation check sheet.
It should also be outlined in the employee manual.
Most employees who come to work for a church from a secular job may not be aware of these differences between the church and religious organizations.
Church leadership should ensure employees have this understanding at the beginning of their employment.
This necessary communication can help to eliminate an awkward conversation in the event of the occasional and inevitable firing of church staff.
You can get more information at the Department of Labor website.
Does your church have a process to provide the Employee Notice to employees when they are hired?
How do you help employees who won’t receive unemployment benefits?
If your church is forced to make the difficult decision to lay off employees, you might want to consider some level of severance pay to help bridge the gap for them.
For example, if finances allow, put together a severance package based on years of service. A typical model allows for a week of pay for every year of service.
Again, this is if your church has savings that can support this.
No church wants to lay off an employee, but if it does, employees should know that unemployment benefits will not be available for them when they leave.
If you are a member of SCM, you can log in to your account here to access an editable copy of a severance policy.
If you are not a member and would like access to an editable copy of a severance policy, you can learn more here.
