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Finance

How COVID-19 Impacts Those Living Paycheck to Paycheck

By Anastasia Iliou 6 min read

Yesterday, across the nation, millions of salaried office workers were stocking up on food and paper goods, preparing for a long week of working from home. They were complaining about how difficult it would be to work with their kids and pets at home and they were scrambling to clean their home offices in preparation for Zoom meetings.

Meanwhile, millions of hourly workers who cannot work remotely, especially in food and entertainment industries, were told that they would either be reduced to half of their normal hours or would not be called into work at all for the next few weeks.

The same people who will be missing paychecks for a few weeks are often the people who are living paycheck to paycheck. Plus, since restaurants are reducing their capacity and fewer people are dining out, restaurant servers who rely on tips could end up making half (or less) of what they normally would during one shift.

In other words, one missed or drastically reduced paycheck can easily lead to missed meals, missed bills, and increased debt.

How Many People are Living Paycheck to Paycheck?

The sad reality is that 78% of Americans are living paycheck to paycheck, according to an extensive survey by CareerBuilder. That number does not only apply to low-income workers, either. The study showed that one out of every ten employees earning over $100,000 per year is living paycheck to paycheck. Whether that relates to poor spending habits, financial illiteracy, or unplanned expenses can vary by family, but it’s happening regardless of the reason.

The Federal Reserve reported in 2016 (when there wasn’t a pandemic like COVID-19) that 46% of Americans could not cover an unplanned expense. Today, people are simultaneously losing their jobs (or at least a few paychecks) and incurring unplanned medical expenses.

Paid Sick Leave and FMLA Are Not Always Options

This coronavirus crisis is leaving a lot of people wondering what FMLA is for if it doesn’t cover COVID-19 leave. The fact is that the U.S. does not currently have a national requirement for employers to offer paid sick leave.

The FMLA (Family Medical Leave Act) requires companies with 50 or more employees to provide unpaid time off for medical leave (which can include caring for a sick family member). Unpaid time off is simply not possible for millions of Americans. No matter how sick they or their family members are, many Americans will continue to show up to work (resulting in the disease spreading more rapidly) because they don’t really have another choice — they need the money. Workers who take unpaid medical leave may not be able to afford medical care, almost leaving FMLA useless in this situation.

How Employers Can Help Alleviate the Coronavirus Financial Crisis

While the government works on a forgiveness plan relating to the financial crisis the coronavirus has created, employers do not have to sit idly by.

Some cities are already putting plans in place to protect people who are losing wages. For example, San Francisco and San Jose are preventing evictions for people who are losing wages and unable to pay their rent on time. However, that might not be enough. Those people still need to put food on their table and support growing health concerns.

Employers can help by revisiting their benefit programs. In fact, there are things employers can do this week that are relatively cheap to implement. These new benefits will not only help the employees affected but will also ensure that the employers can hold on to their staff once they’re able to operate on a normal schedule again.

Offering Early Wage Access/On-Demand Pay

On-demand pay, or early wage access, is an employee benefit that is already growing in popularity — so now might be a great time to implement it. The benefit is usually free for employers and takes very little time to implement.

By giving employees early access to their wages, they’ll be better able to pay their bills on time and purchase the supplies they need to get through this difficult time. They won’t have to wait until their paycheck comes in next week to go and buy cold & flu medicine or groceries. Even if it’s too late to help those affected by COVID-19, we don’t know what’s coming next. Implementing on-demand pay now will better prepare you for the next disaster.

Provide Financial Literacy Opportunities

Thousands of employees who are struggling through the COVID-19 crisis may be struggling due to a lack of financial literacy. They might be people who don’t invest, don’t save, and aren’t great at budgeting.

During this time of need, it’s important to educate these people instead of judging them. Statistics show that parents and teachers alike are not educating kids on managing finances. Kids are thrown into the workforce having never managed their own finances before and are spending inappropriately and making poor financial choices.

The need for financial literacy becomes evident in times like this. Even on a normal day, when COVID-19 isn’t shutting down businesses, employees who are stressed about their finances are probably not going to be as happy or productive in the workplace. Financial wellness and financial literacy benefits are cheap and easy for employers to implement and may even result in growth and reduced turnover.

Your financial literacy program may be as complicated as hosting workshops or as simple as signing up with an early wage access provider that also offers financial wellness benefits.

Revisiting Health Insurance Benefits

The State of Colorado is now requiring health insurance providers to cover coronavirus testing and office visits at no cost to plan members. Regardless of whether your state is passing legislation to face these growing concerns, employees who are hospitalized for coronavirus may not have the means to pay for that care.

This pandemic could last for several months, so there’s no harm in HR representatives taking the time to seek out better coverage. If a company hasn’t reviewed their benefits offerings in a while, there may even be an option out there that provides better benefits at a lower or very similar cost.

Good News for Walmart, McDonald’s, and Olive Garden Employees

At the very least, we know now that Walmart, McDonald’s, and Olive Garden employees are now getting paid sick leave in light of the coronavirus.

Even still, some of those places are franchised-owned. McDonald’s announced that corporate-owned McDonald’s employees will be offered up to 14 days (the recommended COVID-19 quarantine period) of paid sick leave. That does not mean that every McDonald’s employee in America will be offered that time.

If you’re an employer, what are you doing for your employees during this time of need? Employees, how are you making ends meet?

This virus brings up a lot of great questions regarding working in America. We’re just hoping this nightmare will be over soon.

Tags:COVID-19, Featured

About the Author

Anastasia IliouMarketing Manager, Rain.us

Anastasia is the Marketing lead at Rain. When she's not fighting the good fight to end predatory financial products, you can find her volunteering at the Elephant Sanctuary in Tennessee or relaxing with her fiance and their two cats, two dogs, and hedgehog.

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