By David Prosnitz, Personnel Planners, Inc.
Most employers don’t protest unemployment claims filed by their former employees and most don’t know how much this costs them. Employers commonly don’t realize that awarded unemployment claims determine the unemployment tax rate assigned to your business. In 2024, this tax rate is applied to the first $13,590 of an employee’s wages are taxed.
In 2024, the minimum tax rate a business may receive is .850% and the maximum is 8.650%. On a million-dollar taxable payroll, a tax rate of 1% gives a tax of 10,000 and 8% gives a tax of $80,000.
Clearly, the awarding of unemployment benefits to your former employees can be costly. And just think if a claimant was undeserving of benefits but awarded – this could unnecessarily cost your business thousands of dollars.
Basically, the standard for unemployment eligibility is simple and straightforward. If a claimant loses his or her job through no fault of their own, they get benefits. Classically, this is a layoff. And claimants fired for poor work performance are not at fault either for being unemployed. They did nothing wrong; they were in over their heads, and they may be awarded benefits.
Poor performance is not misconduct and claimants should be denied benefits if they commit misconduct at work. Misconduct is willful wrongdoing — the claimant is at fault for their unemployment. They are also at fault for their unemployment if they quit their job so long as the quit isn’t attributable to the employer.
But to enforce this standard an employer must do certain things, and he or she should want to, because unemployment taxes can burden a business.
First, an employer should make good terminations based on a final incident of wrongdoing, if one occurred, with an appropriate warning history in light of a clear company policy or practice. And the employer should keep good records regarding employee quits, recording the reason for the quit if its available to him or her. Written resignation letters may be useful on this score. Second, an employer should respond to all unemployment claims, describing factually what happened at the end of employment.
Third, employers should appeal unreasonably unfavorable decisions to award benefits to hearings and present witnesses at these hearings who have direct knowledge of the facts of the final incident that led to separation.
Most businesses with turnover likely would gain by having third party assistance with unemployment hearings. Initial protests on claims should be written in the language that the unemployment system best understands. Witnesses gain by hearing prep from an experienced paralegal. And a third party will audit unemployment charges – in our experience one in four quarterly statements of benefit charges contains a wrong charge.
Unemployment taxes are often the single largest controllable expense a business has. Third party administration of these claims is incredibly inexpensive, far less for most businesses than the cost of one or two awarded unemployment claims in a five-year period. Please see www.personnelplanners.com for more information about unemployment issues and third-party administration of claims.