State unemployment insurance reduction

The rates that a state unemployment program charges to companies are based on the simple concept that companies who lay off large numbers of employees will pay a higher percentage of payroll than those companies with better employee retention records. This state of affairs is reasonable, since the state unemployment insurance fund must obtain cash from somewhere to pay for unemployment claims, and the companies causing the claims should foot the bill.

There are several techniques available for reducing the state unemployment insurance rate charged to a business. Consider the following cost reduction options:

  • Documentation. Document the exact reasons why each former employee was let go, including paperwork regarding every warning issued. Preferably, have employees sign these warnings. Further, when an employee leaves the company voluntarily, request a signed resignation letter, as evidence that their employment was not terminated by the company. These documents can be used to present the company's case to an adjudicator, in case a former employee claims unemployment benefits.
  • Protest undeserving claims. If an employee files an unemployment claim and does not deserve to do so under the law, always protest the claim with the state unemployment commission.
  • Assign responsibility. Assign a staff person direct responsibility for each protested claim. This person represents the company before the adjudicator. By doing so, no cases should be accidentally dropped.
  • Educate managers. Discuss with all managers the cost to the company if employees are told that the company will not protest an unemployment claim. This may make them more hesitant to make such statements to employees.
  • Review statements. The state unemployment agency should send to the company a statement containing the dates worked and pay levels of a former employee who is claiming unemployment benefits. Review each of these statements carefully, to see if the correct information is listed. Incorrect information could be used to pay higher-than-justified amounts to the former employee.
  • Move. Shift high-headcount operations to states that have lower unemployment insurance rates. This can yield a substantial savings, since the tax rate differences between states can be quite large.