Are Church Employees Eligible for Unemployment Benefits?

Are Church Employees Eligible for Unemployment Benefits?

We are in unprecedented times. This Coronavirus has brought our country, businesses, and employers to their knees. 

Who would have guessed just a few short weeks ago that our country would experience massive business shutdowns resulting in massive employee layoffs? For the church, most are now in Coronavirus mode – meaning they are having virtual services to try and keep their members connected. 

While for most churches (that I’ve talked to) this is working relatively well, the jury is still out on how this will impact donations. Pastors across the country are concerned that if donations dry up, they will be forced to make the difficult decision to lay-off church employees. 

Making the decision to make massive layoffs is not a decision anyone in church leadership ever hopes to make. However, in these uncertain times, that decision for some churches will need to be made. Layoffs in the United States have begun because so many businesses have been forced to temporarily close their doors. This has resulted in a massive increase in unemployment claims. Unemployment claims for the weeks ending March 14, 2020 were about 281,000. 

A relatively typical claim. However, it is predicted that unemployment claims by the end of this week could be as high as 2.5 million! 

Do Churches Qualify For Unemployment Benefits 

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 job 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 job and meet state law requirements. Eligibility, unemployment benefit amounts – as well as – the length of time the benefits are available, is determined on a state-by-state basis. 

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 that are operated for religious purposes. 

Employee Notice 

Because these exempt organizations do not pay into the state for unemployment benefits, many states require a written notice 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 in church and religious organizations. Church leadership should make sure 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? 

Should The Church Lay Off Employees During The Coronavirus? 

I’ve been asked how churches should handle the difficult decision to layoff employees. My answer is – it depends. 

If your church has not noticed a significant drop in donations, try to keep employees on the payroll. If employees can work from home, allow them that flexibility. If employees are in jobs that can’t be done at home – custodial, maintenance – think of projects they can work on during this slow time. 

If your state/county is not on a total lockdown, allow employees to catch up on projects that may be difficult to complete during busy seasons. For instance, if your facility needs painting, landscape work, or deep cleaning, now might be a great time to get that done. 

If donations have come to a screeching halt, then that is a different answer. If your church has a healthy buffer – savings, I recommend trying to keep employees on payroll for as long as possible. If not, deciding who stays and who goes will be a difficult decision. 

To make this decision, make a list of all employees. Then list the jobs that each employee is doing. Prioritize those jobs as those that are mission-critical during this temporary pause in life as we know it. For instance, a receptionist might be a job that can be let go, but the technical person who helps ensure a virtual Sunday service might be critical in the short term. 

Check With Your State 

Washington is working on a relief package that will give temporary funding to households across the country. Part of the CARES package may offer temporary pandemic unemployment relief for some who don’t typically qualify for unemployment benefits. According to a US Department of Labor Unemployment Insurance Program Letter, 

The CARES Act includes a provision of temporary benefits for individuals who have exhausted their entitlement to regular unemployment compensation as well as coverage for individuals who are not eligible for regular unemployment compensation . . . . These individuals may include . . . clergy and those working for religious organizations who are not covered by regular unemployment compensation, and other workers who may not be covered by the regular unemployment compensation program under some state laws. 

Check with your state unemployment office to see if your employees qualify for this temporary benefit. 

How To Help Employees Who Won’t Receive Unemployment Benefits? 

If your church is forced to make the difficult decision to layoff 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 if your church has savings that can support this. If you are a member of SCM you can login to your account 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. 

Communicate Often 

Everyone is experiencing a bit of freak out over this pandemic. 

Develop a process to communicate with employees who may be working from home as well as employees who are temporarily laid off. You can never communicate too much at times like these. At the end of the day, we know that this pandemic did not take God by surprise and that He is our source. 

As church leaders, we are required to help employees through these challenging times by supporting them financially, when we can and continuing our support when the payroll budget comes to a screeching halt. 

This too shall pass and the church will come back stronger than ever. Make every effort to take care of church employees during this crisis so they are able and ready to get back to work when this pandemic is in our rearview mirror. 

Original content by This information is provided with the understanding that Payroll Partners is not rendering legal, human resources, or other professional advice or service. Professional advice on specific issues should be sought from a lawyer, HR consultant or other professional.