An Unpleasant Surprise
Have you ever found yourself surprise and baffled, even blind-sided by your unemployment insurance statement? You may have experienced a scenario regarding a former employee who up and quit on you, maybe without even giving notice to see that your account has been docked a few thousand dollars as a result of what you would regard an arbitrary or even unfair granting of UI benefits to that employee. Well, join the club. It happens to the best of them.
You may have even stumble upon a claim charge from an employee who worked for you a year or more before! You may have sat in wonder thinking or even KNOWING that the employee surely worked elsewhere since. How could we be held liable for these charges?
From huge corporations, to tiny mom and pop shops, wrapping your head and your company dollar around outrageous decisions to hold you and your company responsible for “unfair” unemployment costs can be irritating and sometimes devastating, depending on the dollar amount of the liability you may be subjected to, the number of such claims in any given base year, and the overall size of your company’s workforce.
For smaller companies, you might be afraid of your future regarding growing staff and workforce support. For larger companies, you might be afraid to let staff go who aren’t performing well or who aren’t following the company guidelines, rules and expectations.
Keep it Simple
Most businesses are at a loss to understand or explain how unemployment insurance costs and premiums are even calculated or how and why they are awarded to employees you were sure would be denied. The simplest way to explain UI tax charges would be to compare them to an insurance system most of us can understand. Car Insurance. Just like car insurance rates, which rise each time you get into an accident, UI claims basically follow suit. Every time an employee leaves (like an accident) your company, files a claim (reporting the accident), and is subsequently awarded benefits (the payout), your insurance rate goes up and will only result in your tax account rating (insurance premiums) rising.
So who is in the driver’s seat?
The federal government determines employer’s base rates. The growth of the unemployed demographic drives those rates. Currently, the UI federal fiscal rate averages at approximately .6% of the first $7,00 of any given employee’s wages earned with your company. In some states, this percentage might show higher or lower percentage rates, depending on each states ability to cover its own UI costs. These charges cover the greater cost for state UI programs, and assist states that currently don’t generate enough money to cover the number of claims and extended benefits that may be paid to previously exhausted claims via UI claim benefit extensions.
While the number of unemployed workers drive the current federal percentage rates, the federal government certainly takes the wheel. The claimants are the passengers and Employers may feel like innocent by standards in what might sometimes feel like a hit and run collision! But you can be proactive in minimizing the damages.
Retention! Retention! Retention!
Each employer’s individual tax account rating will depend on the number of claims made against any individual employer. So how can you prepare yourself or protect yourself from the impact of these potential monetary damages? Retention. Retention. Retention!
It is imperative to understand that your unemployment insurance rates is directly related to the number of unemployed workers coming from their previous employment with your company, your overall collective unemployment history, the number of employees maintained on your payroll, how much you have already paid out in unemployment insurance, and the amount of time you have paid on each claim. Also realizing that any claim has the potential of dragging out for up to 3 years, with the application of exhausted claim extensions, as previously mentioned in this article. The potential average of such a claim can be up to the entire $7,000 previously mentioned as well.
Don’t Be Scared to Drive Onward
Please understand, this information is not meant to scare you, but to empower you with knowledge and to promote preventative strategies to protect yourself against such wreckage.
One of the most simple and direct ways to buckle your seatbelts and pump the breaks can be determined before you even start your engines. It begins in the hiring process. Rather than just filling the need or quota for a specified number or workforce employees, see to it that you are hiring the RIGHT candidates for your crew.
Slow Down!
This is not a race. Due diligence in your hiring process cannot be stressed enough. Recruit candidates with the ideal skills to do the job. Ask the right questions during the hiring process. Get a feel of how dedicated the candidate is to the longevity of the position. Can the candidate build a home with your company or are they using the opportunity as a filler or stepping stone to somewhere else? What is the work history of your candidates? How long do they stay on at their previous jobs? How was their work performance at their previous positions? Might they have a history of collecting unemployment benefits from employer to employer?
Yield! STOP!
We suggest starting new employees on a probationary period. A probationary period can be 30, 60, or 90 days. The probationary period for new employees is the time to assess signing an employment contract and/or taking on a potential employee under permanent employment status. The probationary period is your diagnostic period. Be advised, however, that the longer your probationary period is, the greater a possible benefit amount might incur if you choose not to take that employee on permanently. However, the costs associated with not moving forward can be greatly reduced if you decided sooner than later and if you do your best to ensure that you are hiring the right candidates to begin with.
Depending on when your new employee is eligible to come on as a permanent to start collecting benefits, don’t be afraid to either yield or stop the continuation of the transition to permanent status. If you find that you are unsure if hiring the employee on fulltime is in the best interest of your company moving forward, don’t. Extend the probationary period, or part ways. That is what it’s there for.
Swerving before Impact
The impact of a crashed working relationship can be costly and time consuming. From issuing the termination of the previous employee to the costs associated with retaining a new employee (recruiting costs, payroll costs, training time and manpower, benefit onboarding, etc.) and then to the subsequent costs associated with the former employees associated UI claim can cost several of thousands of dollars.
So, let’s again address and reiterate how these costs are minimized long before the employee leaves the company. As stated before, it begins at the hiring process.
Once an employee is accepted as a full time, permanent part of your workforce, it is essential that he is equally treated as such and understand what that means for your work culture and how it directly affects his/her working relationship moving forward. Clear and direct guidelines and expectations should be immediately laid out before him.
The employee should be given to sign, a hard or computerized copy of the employer rules, regulations, policies, procedures, expectations, and ethical codes of conduct. The progressive discipline policy would be made fully aware and the employee should understand that all employees, old or new, should be conducting themselves accordingly.
It is of most advantage to have in place, a systematic approach to handling breeches in policies, procedures, company standards and ethics. A progressive disciplinary policy is not only most common, but most affective, both throughout the duration of employment but especially at the time of a UI claim or appeal. Any such breeches should fully be documented, presented to the claimant, a clear expectation moving forward should be explained, a plan of action, and a brief outline of the possible repercussions associated for failure to improve or meet said expectations. Ideally, a progressive disciplinary process should include most, if not all of, the following steps:
1. Verbal Warning or Coaching (Documented in the employee’s personnel file.
2. (at least one) Written Warning
3. Final Warning
4. Suspension (recommended but not required)
5. Termination
The point of the progressive disciplinary process is to give employees an opportunity to get well adjusted, learn the do’s and don’ts, give employees an adequate and reasonable amount of time to meet your standards or correct behaviors, and to protect the employer from future charges for awarded UI claims. Unemployment law will always seek to ensure that the claimant had an opportunity to correct any issues pertaining to his/her employment to help make the determination if misconduct or any other disqualifying factor in a termination was made appropriately.
However, we cannot assume that all separations from employment and subsequent UI claims are direct results of workers being fired. Some will be due to layoff; some will be due to resignations. It is important that your company handbook outlines the expectations associated with both of those types of separations. For example, if an employee is dissatisfied with his/her job, coworkers, supervisors, culture, etc. have you outlined how that worker might be expected to approach or attempt to rectify their concerns prior to resignation. How much notice have you required an employee to give in the case that they resign? Have you outlined how the notice of resignation should be tendered? And above all, have you head your employees to the standards, rules, regulations, and procedures you spent so much time writing? If not, you might stand to not only crash, but burn in a UI claim or appeal.
The Maintenance Crew
Just like we use companies to handle our vehicular insurance, so should everyone consider utilizing a company, like UCM, to handle unemployment cost management and the claims associated with those costs. Claims and appeals can not only be time consuming and overwhelming, but they can be confusing. Many businesses lose at the claim and/or appeal levels for various reasons. Maybe you have a high turnover and cannot handle the number of claims in an efficiently timely manner. Maybe you lack the manpower, time, or resource to handle such claims. Maybe you don’t understand the verbiage or laws being thrown at you. Whatever the reason, we are here to do it for you.
UCM is a team of unemployment cost management specialists. We monitor all of your claims, help fight your UI appeals, or in some cases, fight your appeals for you.
If you choose to do it alone, hopefully, we have presented you with some strategies to prevail in some of your simpler UI claims, appeals, and appeal court hearings.