State Unemployment – An Employers Only “Controllable” Tax

    Paula Fulghum

    State unemployment can often be a confusing area for employers. In these economic times, unfortunately, employers are faced with dealing with this quite frequently. As an HR management company, we see some common misconceptions about the very fundamentals of it. Here is a simplified version of how it works:

    When you are a new business, you are are awarded the state standard unemployment tax rate for the state where employees work. Once you establish your business over time, the rate will either increase or reduce.

    What causes the fluctuation?

    Low Unemployment Claims = Low Tax Rate
    High Unemployment Claims = High Tax Rate

    Once employees are approved to receive unemployment benefits after they submit a claim that is logged against your unemployment account. If you have multiple claims in a short period of time, your rate will be assessed in the following quarter and it will increase. If you have no claims during the quarter, your rate will reduce. Essentially you are awarded for good management practices and “good behavior” by the state.

    In most cases, unemployment is awarded to employees who are severed from your company at no fault of their own.

    What does this mean?

    It can often mean that your business suffered a loss and you needed to down-size staff. It can mean that you eliminated a position because your business no longer had the need for a specific job because you made changes to your business. It could mean that you decided to outsource certain functions of your business and no longer have the need for certain positions. The key here is the following statement “They are released from your company due to no fault of their own.”

    Then… there is another area that you might be subject to unemployment, even though you haven’t down sized your staff or suffered the scenarios above. Those fall into the category of what we like to call “you didn’t give them a chance to keep their job”- What does this mean?

    Here is an example:

    Your employee isn’t performing their job duties up to your expectations. You suddenly decide to terminate their employment immediately without any warning or communication of how you feel about their performance. Can you do this? We advise that you can if you are located in an “at-will state” and you aren’t terminating them for complaining about their work conditions, discriminatory reasons, or under other illegal or unethical practices.

    The question is will they get unemployment?

    In most cases, they will likely get unemployment if you do not give them a chance to improve their situation. Your employee handbook can help combat unemployment claims with conduct policies citing certain things that warrant instant terminations without warning such as theft, dishonesty, drugs, etc., however, if the termination falls into a category that usually warrants a warning, you may need to think about further.

    How do you do that?

    By coaching and counseling them and documenting their performance and giving them guidelines to follow and expectations of improvement. In human resources we have a common saying- if an employee is surprised when they are terminated, communication has been missed somewhere. If communication is open, employees understand where they need to develop, what they have done wrong and they know that if it continues, they may lose their job. If you are communicating with them in this manner, followed with written documentation warning them when there are disciplinary instances, the chances of their being “surprised” are reduced. Therefore, their chances for qualifying for unemployment once they are severed from your organization are reduced.

    Simply Put…

    Less Surprise = Lower Unemployment Rate
    More Surprise= Higher Unemployment Rate

    For more information or assistance on putting a strategic plan together to control your tax rates, please call us at (864) 451-7809 or visit us at www.innovate HR.com

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