The Employee Rescue Plan Act & What It Means for Retention – Zupnick Associates

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(By: Brittany Brooks)


The employee rescue plan act was extended by the American Rescue Plan. It helped employers and out-of-work employees. Partially or fully shutting down during COVID-19 menat being able to pay employees still.

Depending on how many employees you had, you could still pay them whether they provided services or not. That was the point  Employee Retention Tax Credit, it was meant to reduce unemployment rates.

Programs were also established for unemployed workers:

  • Pandemic Unemployment Assistance (PUA)
  • Pandemic Emergency Unemployment Compensation (PEUC)
  • Federal Pandemic Unemployment Compensation (FPUC)

They could draw from their regular unemployment insurance as well.

The employee rescue plan brought a few concerns from both sides, though. What if employers decided to layoff or fire employees once the employer tax credit ended? Are unemployment benefits stopping unemployed workers from returning to work? 

Either way, it boils down to: Was the Employee Rescue Plan really effective?


Well, it certainly highlighted some issues.

  • Did employers take advantage of this tax credit just to fire or lay off employees when the time period ended?
  • Were employers really able to retain employees?

While according to the Job Openings & Labor Turnover Summary, “the number of layoffs and discharges was little changed”, layoffs and discharges are apparently at a series low, coming in at 1.3 million. This is in comparison to what we saw in March of 2020, when the pandemic first hit, which was roughly 13 million layoffs and discharges. This indicates the Plan did help some employers retain their employees.


The big concern was the amount of large employers taking advantage of the employee retention tax credit. With the guidelines offering sweet returns, many were questioned. If you retained 100 employees and were eligible for the tax credit, you could have received close to a $500,000 tax credit in 2020.

In 2021, the tax credit was increased. The number of employees increased to 500, more or less, and the maximum benefit increased to $14,000 per employee. Significant difference from the maximum of $5,000 per employee back in 2020.

If you were eligible for the employee retention tax credit and retained at least 500 employees in 2021, you could have claimed an even larger tax break at $7 million. The last effective date for the tax credit was June 30, 2021.

But what about other employers who lost employees to other reasons?

Employees Refusing to Come Back to Work

Then there’s the side of employees that are choosing not to come back at all. It’s no secret we’re facing a labor shortage. A large number of employers and business owners seem to believe it’s due to the amount of federal and state aid allotted to unemployed workers.

In some cases, employees are making more collecting unemployment benefits than they did working their full-time jobs. But that’s not the case for everyone.


  • Unemployed workers would rather collect unemployment instead of going back to work.

An unemployed Gainesville, Florida travel agent, stated she used to earn $7,000 a month when she was working. Now she has to scrape by with $275 a week. Even with the extra $600 payment & extra $300 a week, she still only received $2900 for the month.

As we inched closer to September, those extras were cut off and she’s left with only $1100 a month. Not exactly enough to make someone choose to stay home.


However, for lower income industries like:

  • Retail
  • Hospitality
  • Food
  • Leisure

Unemployed workers could have received more money from unemployment or pretty close to what they would make full-time. But the unemployment benefits aren’t what’s holding them back some say.

They’re looking for better wages, benefits, and for some, better work environments. We may not have seen a lot of employers laying off or firing employees, but we have seen an influx in employees quitting their jobs.

In the Job Openings & Labor Turnover Summary, roughly 3.9 million employees quit their jobs in June of 2021.

Are employees quitting for the same reasons unemployed workers aren’t coming back to work? Is there something that employers can do to improve their retention without the aid of the ending ERC? Perhaps this list of biggest reasons why many employees are quitting can help answer some of those questions. 

Many employees report to be quitting to find more:

  • Flexible work schedules
  • Higher paying jobs
  • Better benefits
  • A better office culture
  • Improved work environments & conditions

Maybe we have the wrong idea. It’s possible we need to improve as employers before we place the blame on unemployment benefits. The employee rescue plan was effective in some areas, but it showed us how much we need to improve to increase employee retention.

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