Employer Contesting Unemployment? Protect Your UI Tax Rate

Employer Contesting Unemployment? Protect Your UI Tax Rate


Employer Contesting Unemployment

For the month of July, the national unemployment rate dropped to 4.3 percent. Since the beginning of the year, employers have added almost 900,000 new jobs, but despite this positive data, there are still millions of people out of work and many of them are filing unemployment claims.

Because employers are responsible for supporting the unemployment insurance (UI) system, the more claims filed, the higher the employer’s individual UI tax rate could be. Unlike federal unemployment taxes, which have a fixed rate for all employers, state unemployment tax rates are not fixed.

The state UI tax rate mostly depends on the number of former employees who are successfully collecting unemployment insurance benefits. Companies that terminate more employees will pay more in UI taxes in future years than other companies with better employee retention.

Employees who are separated because of layoffs or poor performance are usually entitled to get UI benefits. Employees who are terminated for misconduct or decide to voluntarily resign, are not typically eligible. If a former employee files a UI claim, their company must make the decision to contest the claim or allow them to collect UI benefits.

Good news is, there are ways an employer contesting unemployment can protect their unemployment tax rate from rising. Employers can help limit unemployment claims by maintaining a solid understanding of the unemployment claims process and following best practices.

These are the UI best practices an employer contesting unemployment can follow:

  1. Be sure to respond to claims on time.
    If a UI claim comes across your desk, be sure to respond within the required period – even if the employee is not eligible for UI benefits. If you fail to respond in a timely manner, the employee may win the claim, even if they were not eligible to collect.
  2. Document everything about an employee’s performance.
    Maintaining documentation that tracks an employee’s performance and conduct in the workplace is a standard HR practice. For many claims, the quality of this documentation forms the basis for winning or losing a claim. In cases of fraud, misconduct or violations of company policy, documents such as prior warnings, disciplinary action reports, performance improvement plans, employee handbooks, acknowledgement-of-receipt forms and resignation letters can be used by employers to defend against a claim.
  3. Monitor reconciliation statements for errors.
    As part of protocol, states send employers a record of all charges against the employer’s tax account during the year. The reports could mistakenly include overpayments, payments to disqualified claimants and even payments to individuals who were never employed by the business. Employers should carefully review charge statements regularly, because the time frame to contest errors is limited.

An employer contesting unemployment can consult with a third party to help manage their UI process. It alleviates the chance for errors and late paperwork. Third parties can also help mitigate unemployment-related risks.

Industrial U.I is that expert third party that will help your company navigate the muddy waters with our unemployment tax services. Contact us today for more information about our services.