Why Unemployment Claims Matter
Do you fight unemployment claims made against your business?
So often we come across employers who don't bother to respond to unemployment claims made by ineligible employees. The main reasons are either time (this is just one more admin task there is just no time for), a feeling of being powerless (unemployment will be rewarded no matter what anyway), or just being totally unaware of the consequences of a single claim (it doesn't really matter for anything, so who cares?). But the truth is, it is possible to contest claims, it doesn’t take that much time if you prepare ahead, and the implications of not doing so can mean a significant financial difference to your business.
What undisputed claims actually cost you
Employers typically pay the required unemployment tax based on an "experience rating" percentage amount which is based the Company’s specific history of paying claims (note this is specific to State Unemployment tax, not Federal, which is a fixed rate). The more claims paid that are tied to your business, the higher your rate will be. The range currently for NYS is 2.1% to 9.9%. This “tax” is applied to your business each time you run payroll, up to the first $12,500 of each employee’s wages each year (specific to NYS in 2023). This means the more unemployment awarded against your business, the higher your rate, and depending on your headcount, this could be a significant amount of money. For example, if you have 50 employees (and assuming no turnover), at the lowest rate of 2.1% your unemployment tax total for the year would be around $13,000; but if you are at the higher end of the rate spectrum of 9.9% this number would jump to more than $60,000! That’s almost a $50,000 difference in a very avoidable cost. And even worse, one claim can affect your rating for years, compounding the affects of the increase.
If you are unsure about what your rate is, you can find this out by looking at the percentage being taken out of payroll each pay period (through your payroll system). You can also find this and other information on your claim history, etc. through the NYS unemployment portal found here.
What you can (easily) do to reduce your costs associated with unemployment.
So what’s our point? If you aren’t taking unemployment seriously, you should. Many residual bad habits and increased costs on businesses from COVID are still subsiding, and unemployment is certainly one area any employer can start to take back some control (and money), with very little effort. Here are some ways to do that:
· Register for the NYS “SIDES” system. Having finally taken a step into the 21st century, NYS now has an online portal to communicate with employers about claims being made, decisions on claims, and charges. In fact, NYS also has stopped mailing employers quarterly charge statements (which are essential for you to review, challenge, and mitigate claims being made against you), so registering for this portal and checking it regularly is almost necessary at this point.
· Challenge unemployment claims. Unemployment benefits are defined by NYS as being intended for those who have lost their job “due to no fault of their own”. This means those that have resigned, or who have been terminated for their own misconduct/performance should not receive unemployment benefits. Employers should have no reservations about disputing claims made by individuals in these circumstances, especially considering the costs associated with not doing so. It’s also important to make sure to respond to initial claim information within the required time frame to avoid the additional difficulty of fighting a claim afterward, and trying to pull back already paid benefits. If you do miss a claim initially and find a charge later that you know is unwarranted or even fraudulent , you can report that information as well to reverse the charges from your account.
· Prepare and send supporting documentation. In order to increase your odds of winning a claim dispute, make sure you are keeping thorough documentation on employee separations. This includes always making sure to get resignations in writing (even a screenshot of a text is better than nothing) and documenting poor performance and misconduct leading up to the termination. This often also includes documented proof of efforts made for the employee to improve before proceeding to termination (warnings, conversations, etc.). Keeping these records is a great practice for many reasons other than fighting unemployment claims, but providing them with a claim dispute will definitely increase the odds of avoiding charges.
· Keep employee turnover down. Finally, turnover can add to your unemployment costs not only because separated employees are going to be the ones to make claims (obviously), but also if you consider the fact that unemployment tax is applied only to the first $12,500 of a single employee’s wages. That means if someone leaves, you are going to be replacing them, and starting your unemployment count at $0 again for that headcount slot. Having a stable workforce is beneficial for many reasons, and this is just another reason to make all efforts from hiring to firing more purposeful. For tips on how to reduce turnover, check out this piece we wrote a while back, or this piece on hiring better, which is the first step in preventing later turnover.
At a time when it seems like the number of factors stacked up against employers is insurmountable, it’s time to reset some narratives about what is controllable and reasonable. Unemployment is one of those areas. It is possible to fight claims where unemployment is not warranted, and the financial consequences of not doing so can be immense. We recommend making this a priority for your business in 2023.
