This is because unemployment insurance speaks not only to how attractive a company’s compensation package will be to new employees, but it also ensures that your company is adhering with stringent state and federal laws.
No matter what state you operate in, you will almost certainly be required to pay unemployment insurance for at least some of your employees. Not all workers, however, will qualify for unemployment insurance, so you will not be obligated under state or federal law to pay unemployment insurance for particular workers. The conditions that make certain employees ineligible for unemployment insurance vary from state to state, however, you will need to consult with a good attorney or review state unemployment laws to ensure your company is in compliance with the law.
Unemployment insurance (UI) is a program supported by state and local governments to protect workers who lose their jobs through no fault of their own. In the event of involuntary job loss (i.e. layoffs, downsizing), unemployment insurance helps temporarily offset the workers’ lost income. These payments are not intended to equal the workers’ standard wages—they are typically around half of the workers’ take-home pay.
Additionally, these payments are provided only for a limited amount of time, often determined by the state. The average period is 26 weeks, and the worker is required to be actively job-seeking at the time.
Extensions may be given beyond the established period, but only under certain conditions, such as when the economy is down and the worker has been making — without success — a consistent, good faith effort to find employment.
This webinar was recorded on September 22, 2016, and presented by Jametra Isaac, G&A Partners’ UI specialist. Please be aware that per HRCI guidelines, only webinars recorded during the current calendar year are eligible for recertification credit for on-demand viewers.
Though unemployment insurance is a governmental program established in the 1930s to support workers and families ravaged by the Great Depression, it is the employer’s job—and legal responsibility—to implement the program in his/her own business.
Unlike most government programs, unemployment insurance is fairly simple: the employer pays a tax, which is determined by the state, on the wages of all employees qualifying for unemployment insurance. That money goes into a fund controlled by the government, which then distributes it in the form of unemployment benefits to qualifying workers who have lost their jobs through no fault of their own. In other words, they didn’t voluntarily quit and they were not fired for a reasonable, documented terminable offense.
According to the laws in your state, if your employees qualify for unemployment insurance, then there is not much you can do legally to avoid paying these taxes. However, there is a lot you can do to minimize the cost of unemployment insurance and claims.
In the first three years of your business operations, you will qualify for the “new employer” tax rate. This is a minimum tax rate determined by your state: the rate is established as a “percentage multiplier” of your employees’ base wages. If the state determines, for instance, that companies under the new employer tax rate have a base multiplier of three percent, then the employer must pay three percent of each qualifying employee’s base pay into the government unemployment insurance fund.
This rate, though, is the bare minimum—and that’s what’s important. This rate can never go down but it can skyrocket if you, as the employer, aren’t careful. Layoffs, downsizing, and employee terminations where you don’t successfully prove that the employee was fired for legitimate policy reasons can all make the costs of your unemployment taxes soar.
So, here are a few tips to keep those unemployment taxes under control:
Unemployment insurance may not be glamorous. It’s not going to be the best or most interesting part of your day as a business owner—but it may well be among the most important. After all, unemployment insurance ensures you are in good standing with the law and helps you to attract the talent you desire and your company deserves.
While G&A Partners can’t help you avoid the emotions that accompany a layoff, we can help you avoid the painful process and potential risks associated with unemployment claims. Our knowledgeable HR professionals have extensive experience managing and administering State Unemployment Insurance (SUI) claims, as well as COBRA insurance, and more.