Long-term care facilities are among those that are using the ERC as an incentive to retain employees. Nursing assistants and personal aides who have been with the same employer for one to three years receive a $1,000 bonus for every six months they stay in the same position. Currently, these employees are eligible for a $3,000 credit, per year, and $6,000 total if they have worked for the same employer for four or more years. A state-licensed professional health care worker is also eligible for a higher $6,000 credit, per year, and $13,000 total if they have been employed for the same employer for four or more years.
Employee Retention Credit Benefits Both Employers And Employees
An ERC can be a powerful incentive for both employers and employees. In the case of nursing home employees, a discount of $1,000 per year can be a significant incentive to keeping a long-term employee. This can go a long way to help nursing homes with staffing challenges and keeping current employees. At the same time, the ERC helps employers meet the cost of recruitment and training new employees. At the same time, employees can benefit, too.
For instance, many employers offer high hourly wages in a high-cost, low-skill occupation. Such wages may be more than enough to cover a high-tuition college education or certification. The $1,000 in reimbursement per year that a new employee receives from their employer is particularly valuable, in helping an employee stay in their field, even when there is no potential for a more lucrative job down the line. At the same time, employees who are eligible for the ERC may see a little extra money from their employer each year. This bonus can help them pay off student loan debt or save for a down payment on a house or car.
A Typical Employee Retention Strategy
Employees in high-cost, low-skill fields face the prospect of taking significant amounts of student debt. If they are planning to take on student loans, ERCs can help alleviate some of the financial burdens of a student loan. A similar approach can be applied to other debt, such as the mortgage, car loan, or credit card payments that many workers have to make.
Roughly half of the state workforce is eligible for the ERC. This includes people who work in nursing homes, home care, and facilities for developmentally disabled people. Approximately 90 percent of these workers are under the age of 30 and are less likely to be eligible for other forms of state employee compensation.
While this worker demographic is diverse, the demographics of nursing home employees can be roughly divided into two groups. Many, but not all, are women. The vast majority of nursing home employees are white, with large numbers of African-American workers as well.
Employers are turning to the ERC as a strategy for keeping workers with benefits that are otherwise difficult to offer. The typical cost of paying overtime to personal care aides and nursing assistants is about $3,000 a year. Typically, state employee benefits cover only a little over half of the cost of providing these workers with overtime pay, or slightly less than half.
An ERC that is paid by a state employee’s employer reduces the cost of paying overtime. Since state employees can benefit from the credit just as much as private-sector employees, the ERC can help employers offset overtime costs and retain employees at the same time.
In a nursing home or home care setting, an additional $1,000 or $2,000 a year can be enough to get back-to-back shifts covered, instead of the assistant working overtime one shift and staying home another. The extra $1,000 a year from an ERC can help with that extra expense, and if it comes with free tuition, it is not going to take a lot of additional effort to provide the assistance.
State employees who earn less than $35,000 a year and work in jobs that are not covered by state employee benefits can earn up to $3,000 per year from the ERC. It would be difficult for a nursing home or home care provider to offer an ERC that high. This is one reason why ERCs are so common in the private sector, but not in the public sector.
ERC – A Way to Boost The Quality of Care Facilities
The ERC may be another way to boost the quality of care at nursing homes and facilities for disabled people. Long-term care is one of the most expensive aspects of caring for someone with a disability. The federal government provides funding for about half of the care that people receive, but states bear the other half.
The level of care provided in nursing homes and other types of care facilities varies from state to state. An investment in education for staff can help reduce some of the variation in the quality of care. The ERC also offers a way to pay people who work in long-term care. Not all workers can afford tuition, but with an ERC, low-income workers can receive tuition assistance.
The ERC can also help raise the wages of low-wage workers. Though wages have risen since the start of the Great Recession, they remain low. A person who earns the minimum wage of $7.25 an hour cannot earn more than about $15,000 a year working full time, while someone who works full time in a nursing home or care facility earns a minimum of about $17,000 per year. As an employer, the ERC would help defray some of the cost of tuition.
ERC – Sign of Safety Concerns for Workers
ERC may help improve the quality of care in nursing homes and other facilities for disabled people, but it could also be a sign of trouble for employers and workers. Since most nursing home administrators and workers have worked at these facilities for a long time, they may not have a lot of experience of other jobs. They are not used to dealing with the problem of overtime.
In fact, employees at nursing homes are so used to working for low pay that it could be difficult to bring them up to minimum wage without a significant decrease in quality of care. A major problem with ERCs is that employers or workers are not used to dealing with them, and may not know how to react to the ERC.
Assuming that the state benefits from the cost of the ERC, this is yet another factor that could impact the quality of care. The ERC would give some support to programs such as mandatory paid sick days. It could also put a dent in what some view as a way of cutting costs. There is a fear that poor-quality care could be passed along to consumers.
Flexibility for The Middle Class
The ERC idea has been floating around Washington for a few years, but the concept got some publicity in 2013 when a Department of Labor program added the extra tax to employee paychecks.
The ERC is similar to a measure in the California legislature to create a state dividend that would distribute $2,000 a year to every adult in the state. When that bill passed the California assembly, supporters of the program saw the ERC as the model.
“I think if you look at what they did in California, this is a reasonable approximation of what they did,” labor economist Julia Gordon told The New York Times.
Supporters of ERCs also see it as a way to help low-income people without breaking the budget. The ERC is not designed to be a significant new source of funding for public programs. It’s an increase in tax on the wealthiest citizens who can afford to pay for it. The ERC would benefit middle-income earners.
But the amount of money the ERC increases for people who work in the nursing homes or other long-term care facilities is not clear, and may not be enough to increase wages for the workers. It is also possible that the ERC could help the wealthiest Americans without cutting into the budget for low-income people.
Some advocates have expressed concern that states would be able to collect more in revenue from the ERC than they currently spend on unemployment benefits and food stamps. This could be a loophole for some state governments that want to increase spending without increasing taxes, they say.
Challenges to the ERC
The basic idea behind the ERC is that workers will be more willing to work extra hours because the extra pay will put extra food on their tables. The ERC also would be paid in addition to an employee’s wages, which could lead to less time to be spent on other work. There is also the question of whether ERCs encourage some employers to increase their profit margins.
A May 2012 report from the Center for Union Facts (CUF), a nonprofit that supports business interests, warned that the ERC would “start a race to the bottom as states cut benefits and raise the entry-level wage” for nursing home workers. CUF argues that workers in long-term care homes are paid below the minimum wage and on the job should not have to “obligate themselves to perform more than 40 hours a week in a dangerous work environment.”
Supporters of ERCs, however, say that the goal is to increase quality care and productivity. And the ERC would help the working poor.
Who’s Against It?
A group of Oregon labor leaders, health care advocates and former state legislators is fighting the idea of the ERC. They say the ERC will not solve problems of low wages and low job security for long-term care workers. In addition, they say, the ERC may mean that care facilities will increase their profits at the expense of patients. And they warn that it could be politically divisive, dividing lawmakers along class lines. “This would be one of the more important policy fights we’d have,” said Sarah White, a legislative advocate for the Oregon State Public Interest Research Group.
What Will Be Done About it?
The Maine initiative is at risk of falling short because the campaign only has enough money to submit the necessary signatures. The campaign needs more than 71,000 signatures to put the initiative on the ballot. But other initiatives are likely to come up in other states. The issue of raising wages for home care workers has been proposed in Michigan, Missouri, Arizona and Illinois, and is part of a push by home care workers to unionize.
How the ERC Works
The ERC program is available for up to six months and would provide a one-time lump sum to families that earn at or below the federal poverty level. It would be based on an employee’s salary and the ERC would amount to a fraction of that.
So, someone who earns $10 an hour would receive $600 while someone who earns $15 an hour would receive $240. The amounts are higher if the worker earns more. The maximum payment is capped at $3,200 per family with a maximum of $10,000 for a family of five. And an employer cannot simply use the ERC to pay a minimum wage increase.
ERC sponsors would be required to keep records of the ERC and to provide them to the state labor commissioner annually. If the state collects unemployment or food stamp data for the state, it must also include information about the ERC.
Not All States Support the ERC
While Maine appears to be leading the way on the issue, other states are still debating whether the ERC is a viable option. Some of the opposition to the ERC comes from conservative state lawmakers, who see the ERC as a potential bailout for labor unions. Others worry that it will leave the state vulnerable to being sued by organized labor. Legislators in Arizona debated whether to submit a state-wide ERC proposal for the 2016 ballot, but a bill that would have given the state authority to issue ERCs died in the Senate in 2015.
Some municipalities in Oregon have passed ordinances that prohibit ERCs and the Maine bill that would have mandated ERCs did not survive the Republican-dominated state Senate, despite initial support from some Republican lawmakers. An NPR/ProPublica investigation found in 2014 that nearly half of care workers in long-term care facilities in California earn less than the state’s $10.50 an hour minimum wage.
Conclusion
ERC is benefiting the care facilities , which seem to be seeing increased profits and profits increase while wages for the care workers have remained stagnant. Some have raised concerns that the ERC could become a burden to employers. In other states that have considered the ERC, some legislators and policy analysts are voicing opposition to the program.
But it is too soon to tell if voters in Maine will agree to a potentially expensive and controversial program. Although polls have shown that Maine residents support raising the minimum wage for home care workers, some doubt that they will agree to an ERC program.