Any Unemployment Insurance for Non-Profits?


Any Unemployment Insurance for Non-Profits? | Tony W. Cartledge, Non-Profit, Health Care

Tony Cartledge is associate professor of Old Testament at Campbell University Divinity School and contributing editor to Baptists Today.

So, the nation’s economic malaise finally worked its way down to your job as a staff minister, support person or preschool teacher at a church or other non-profit organization. That’s bad, you think, but at least you can draw unemployment while looking for another job.

Think again.

While most employers are required to make quarterly payments to cover the cost of state-run unemployment insurance programs, religious organizations are exempt. So, even though a newly unemployed person might meet all the normal criteria for unemployment benefits, they won’t get any if they’ve been working for a church or other non-profit organization—unless they live in Oregon, the only state that requires non-profits to participate in the program.

Patty Edwards Shaver, a Raleigh-based career planning and employment specialist, explains it this way:

 

“Many years after the unemployment insurance program began, the Federal Unemployment Tax Act (FUTA) was amended to exclude 501(c)(3) organizations with religious affiliations. Although these organizations must pay FICA and other taxes, they have special tax-exempt status and are not liable for FUTA taxes. This means laid off employees from these organizations are not considered eligible workers and are not entitled to unemployment insurance.”

 

There’s one possible exception, according to an employee with the Economic Security Commission, who told Shaver that non-profit employees who have worked for another employer (presumably one that pays FUTA taxes) within the past five years could still be eligible.

In some cases, both employer and employee may be unaware that the familiar channel for unemployment benefits is not available to them.

 

“It doesn’t have to be that way,” Shaver says. Churches and non-profits can plan ahead and be prepared to protect their employees. There are, in fact, private insurers that specialize in unemployment insurance for nonprofit organizations, including First Nonprofit Companies.

Another option, Shaver suggests, is that churches or non-profits set aside funds for severance packages based on employees’ salary and longevity. These could help make up for the lack of government benefits available to them. Churches or non-profits should also consider providing career planning and employment transition assistance to help laid-off employees return to the work force, she says.

“Many managers state that the worst part of their job is letting people go,” Shaver says. “Knowing that they can prepare for tough economic times may help both employer and employee rest easier.”

Today’s economy, like the late-season snowfall that just pounded the east coast, brings with it more than enough cold and unpleasant surprises. Churches and non-profits should plan ahead and do what they can to cushion the blow for workers they can no longer afford.

 

Tony Cartledge is associate professor of Old Testament at Campbell University Divinity School and contributing editor to Baptists Today, where he blogs.

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