A Guide to Unemployment for Small Business Owners

The pandemic has not only taken a huge toll on physical and mental health but also had a devastating impact on employment rates. Everyone plans for uncertainties, but the pandemic changed the definition of uncertainty. The situation forced many entrepreneurs to shut down their businesses. So it’s essential to know the current rules and latest updates on unemployment for small business owners. It is also necessary to find out about the eligibility criteria for unemployment benefits.

In this article, we hope to take you through everything you’ll need to know for filing for unemployment as a small business owner.

The CARES Act for COVID Relief

According to President Joe Biden, help for small business owners is one of the key elements covered in the American resume plan in the COVID era. Vice-president Kamala Harris supported this and a cash relief package of USD 325 billion was given to 127 million Americans. Under the second phase of payment, the government expands the COVID relief fund to include another 37 million Americans. This second phase includes a direct deposit of 17 million, with a total cash relief value of over 38 billion dollars.

Source: CDCLoans

According to a survey, seventy-six per cent of small business owners suffered huge losses during the pandemic. Many business owners could not claim unemployment benefits until the Coronavirus Aid, Relief, and Economic Security Act came into force. This Act solved unemployment claim issues and expanded their eligibility and benefits. The provisions of the CARES Act are as below: 

• The package contains over two trillion worth of relief funds for workers and small business owners.                                                                     
• It provides exclusive and extensive guidance for unemployment insurance programs

Additional Benefits of the CARES Act are: 

• Apart from the weekly benefit, people eligible for unemployment for small business owners will receive six hundred dollars funded by the federal government.
• Regular unemployment insurance is for ten to twenty-six weeks. However, under the CARES Act, one can collect unemployment insurance for an extra thirteen weeks.
• One can collect a total of thirty-nine weeks’ benefits through unemployment insurance. However, it should be aligned with the policy of the state where the person works. To know more about the CARES act, you can read this article and understand the five W’s for small business owners.

Eligibility for Applying to Unemployment Benefits

The eligibility criteria are standard for small business owners and other workers. People are eligible for unemployment for small business owners if –

• They have lost a job due to COVID-19.
• The workers are in quarantine on the recommendation of a healthcare professional.
• They need the help of an external facility to take care of their children or other family members, and their businesses shut down because of the pandemic.
• They are unable to work during the quarantine.
• Any of the family members need medical and personal care, affecting their work.
• Part-time workers, freelancers, and independent workers can also apply for unemployment benefits.
• The application for unemployment for small business owners also depends on additional elements like –

1. 1. Were they part of a sole proprietorship or did they hold a position in the company and draw a salary?
   2. Did they pay both federal and state unemployment taxes (FUTA)?
   3. Have they lost their employee status? 
   4. Are they actively looking for work and alternative opportunities? 

If your answer is yes, to most of the above questions, it is likely that you’ve met the eligibility criteria for unemployment benefits.

People who are not eligible for unemployment benefits for small business owners under CARES Act are –

• People who can work remotely with no geographical constraints
• If they receive sick leave with payment or other benefits
• If the business is closed because of other factors not related to the pandemic

Process for Applying to The Unemployment Benefits Program

One must address the unemployment application directly to the state office. Different states have different rules and regulations, so it is essential to know a particular state’s policies. But there are a few documents that can be kept ready for the application process:

• The identification number of the employee
• Tax returns for both business and personal income
• Pay stubs of the previous year

Essential Factors That Applicants Must Consider

• They must respond immediately to the government’s notice, as every application has a deadline regulated by that location’s state authority. The general timeline is ten days, and because of this short duration, the applicant must be careful, look for notices, and respond proactively.
• The applicant must be aware of their state policy on unemployment for small business owners, as the state rules are subject to change. The applicant must be up-to-date about any change that might affect their unemployment benefit.

Other Options for Those Seeking Unemployment Benefits for Small Business Owners

Information on several COVID-19 relief programs is available for people seeking unemployment benefits. Not only the CARES Act, but there are also other state-regulated unemployment insurance programs as well. These are applicable for unemployed people even if their unemployment is unrelated to the pandemic.

Paycheck Protection Program (PPP) Loan for Small Business Owners

According to a survey by the NFIB, 74% of 2020 Paycheck Protection Program borrowers have applied for loan forgiveness. The economic outlook has improved slightly over the last few months with 11% of owners reporting that conditions are back to normal now, a six-percentage point improvement from late January.

So what is the Paycheck Protection Program Loan?

• This program creates an application period only for small business owners who have less than twenty employees. 
• There will be new funding rules for independent workers and sole proprietors. 
• One billion dollars will be set aside for sole proprietors. 
• This program will also allow access for student loan defaulters under the federal government. 
• This program also offers benefits for lawful non-citizens of the US.

Thirteen per cent of small business owners report that they will have to close their doors if current economic conditions do not improve over the next six months, down from 25% in December 2020.

Although the economy is improving, the overall recovery remains uneven across the small businesses. It is crucial that small businesses are given the resources and flexibility needed to ensure they will have a successful recovery.

The PPP Extension Act of 2021 extends the small-business lending program by two months and permits the Small Business Administration to continue processing loan applications through the end of June. Lawmakers lauded the passage of the PPP extension, given that many small businesses are still suffering financial hits brought on by the pandemic. That’s why Biden included $50 billion in small business aid in his stimulus plan, including $7.25 billion specifically for the PPP.

Unemployment Benefits to Small Business Owners in Europe

Millions of Europeans would have suffered extensively if there were no COVID relief funds. About 7% of the European population could not even cover one month of essentials. The European government has also shown particular concern over unemployment for small business owners. Small entrepreneurs are cash strapped in the best of days but COVID has made this cash shortage dire. When businesses run out of cash, debtors and employees aren’t paid. Leading to a free fall of the economy as we know it. 

The European government has also created several relief packages for unemployment for small business owners. There are forty-four countries in Europe with specific rules for their states. Here is a list of a few European countries and rules regarding unemployment for business owners.

United Kingdom Unemployment Benefits for Small Business Owners

The government has announced a coronavirus job retention scheme under which employees can remain on the payroll. The government will pay eighty per cent of their salaries to a maximum of two thousand five hundred euros. The unemployment benefit seeker can apply at the government’s website. Self-employed individuals in the UK can apply for self-employed income support schemes. The scheme offers a maximum monthly allowance of up to 2,500 euros. However, anyone claiming universal credit or is on maternity leave must check their eligibility on the government’s website. Another scheme for the small and medium enterprises is the ‘Coronavirus Business Interruption Loan scheme.’ In this scheme, businesses can access up to 5 million euros for up to six years. The company must have an annual turnover of 45 million euros. Companies can access loans, invoice finance, overdrafts, and asset finance for up to 5 million euros.

France Unemployment Benefits for Small Business Owners

Small business owners with a reduced turnover can apply for a packaged grant of 1500 euros in the initial phases. It can be extended to 2000 euros later according to requirement. The government will consider their turnovers of the previous year to determine their incomes and the amount they will be eligible to receive. One of the conditions that will determine eligibility for the unemployment benefits for small business owners’ package is that the applicant should not have over ten employees. The annual turnover must be lower than 1 million euros per year.

They may also apply to other state-guaranteed packages on the government’s official website. France’s government has prioritized the small and micro sectors, offering 4 billion euros for small and micro-business sectors. This fund is only for tiny business enterprises facing tough times because of the pandemic. The fund includes tax returns prepayments, bridging loans, and innovation loans.

Germany Unemployment Benefits for Small Business Owners

The WSF package of the government offers 400 billion euros as loans for small business owners’ unemployment benefits to help them run their businesses. A company with less than five employees is eligible for a 50 million euros non-refundable package from the German development bank- KfW (Kreditanstalt Für Wiederaufbau). A company with up to ten employees can claim 15000 euros. The state government of Germany has announced that the government will pay 60 per cent of the net wage. People with at least one child are eligible for 67 per cent of their net salary.

Spain Unemployment Benefits for Small Business Owners

The Government of Spain announced a package relief fund of 214 billion euros for small business owners’ unemployment. The lender Instituto De Credito has been given additional means by the government to offer loans to small and micro-companies. There is a hundred per cent liquidity support for small and medium enterprises. All businesses, irrespective of their size, can apply for a loan guarantee scheme.

Italy Unemployment Benefits for Small Business Owners

The state lender Cassa Depositi e Prestiti (CDP) offers help in the form of liquidity to the small and medium business enterprises with a state guarantee of up to 5 million euros. Self-employed individuals can claim an extension on the loan tenure. To help Italy’s five million self-employed people, the government has declared a scheme where self-employed workers can get a one-time payment of 600 euros.

The pandemic caused governments to form new rules to save people’s livelihoods. Different countries and states have been offering unemployment benefits for small business owners. To apply for unemployment for small business owners, the applicant must understand their state rules and visit the government website to learn more about the application process.

Small Businesses are the Backbone of the Economy

The US rescue plan provides emergency help to small business owners, as they are believed to be the engines for the country’s economic growth. According to Johns Hopkins University, the US is the worst-hit country. It is therefore essential to provide immediate help to all the workers and self-employed professionals. 

The guide to unemployment for small business owners answers key queries about eligibility, funding, state rules, and country-wise updates of different relief packages for small business owners. HR needs to understand the rules and regulations on both the federal and state level. If they know the recent changes taking place in state rules for unemployment benefits, they can work in a more organized manner.

We understand just how confusing it may be to direct people to collect unemployment in these trying times. Reach out to us @HarmonizeHQ if you need any help regarding all this and more.