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My Rates are WHAT?!?!
The Truth Behind State Unemployment Rates
I recently spoke to a company who was unaware that their State Unemployment rates were drastically higher than average. Not only was their State Unemployment rate significantly higher than average (about a point); but they were also being assessed an annual fine of nearly 2% on top of their State Unemployment Tax. It made me wonder how many General Managers or Business Owners actually know what their State Unemployment rates are and what events affect the rate.
State Unemployment rates are given to a company who will employ W2 workers. These rates vary based on three factors:
1. Staff turnover
2. Number of State-approved unemployment claims
3. Money in Reserve Account (Every year, an employee will pay State Unemployment Taxes (SUTA), up to $11,300.00 per person. The taxes go into a “reserve” account per employer in order to cover the costs of unemployment).
The organization who I was working with recently re-branded themselves; and in the process they lost several staff members. Because these prior employees also were eligible to receive unemployment, the company had what seemed to the State as “excessive” claims being approved against their company. Also, as short-term employees, they had not contributed much towards the “reserve account”. The State was “paying out” to the claims, but did not have enough funding available for this company to cover the claims.
So, you ask yourself, how can we minimize this risk? There are a few ways to avoid this situation. The first step is to respond to every unemployment claim that crosses your desk. When you take the 2 minutes to fill in the questionnaire, it not only buys you time to have to fund the claim, but it makes the prior employee responsible to provide documentation supporting their claim. In most cases, the employee will fail to pursue or fail to show for any follow-up necessary. Oftentimes, you as an employer can avoid paying unnecessary claims by simply responding. The next step is to assess why you are experiencing turnover and make a decision to train, manage, or otherwise “fix” the reason behind the increased turnover.
Related to State Unemployment, there are two distinct advantages of joining forces with a PEO like HRBenefix. I can provide my State Unemployment Tax rates to my clients (typically lowering their payroll costs); and I also manage any/all unemployment claims coming through the door.
–Laura Brand
Related articles
- Unemployment rates fall in nearly all US states (nzherald.co.nz)
- Unemployment insurance tax rate to decrease (kitv.com)
- California’s unemployment rate increases (lexingtonlaw.com)
Outsourcing your Business, Payroll
I’m often asked what I do, and why. So, here I am: creating a blog to tell anyone, who wishes to listen, all about the life and times in the “HR” world. [I have spent many years in the “recruiting” world which falls under the same umbrella. Recruiting is a 2-glass-of-wine conversation, which I will reserve for later]. When I say to others “I represent a PEO“, the look on their faces is absolutely priceless…I know they are thinking “A p-e-huh?”; but their PC question comes out “What, exactly, is that?”
A PEO is a Professional Employer Organization. The most understandable way to describe the PEO is this: when you work with me, you become part of the “SEP Plan” (“somebody else’s problem” plan). I literally take on your “problems”: risk, compliance, personnel, Benefits Administration, insurance, payroll, taxes, filings, training…the list is long! One study I ran across showed when organizations outsourced multiple functions (listed above) to a single vendor, they saw an average 32% stronger cost efficiency than businesses using multiple vendors (thanks to PricewaterhouseCoopersLLP for their whitepaper on the costs of HR and Payroll). What would you do with that savings? Many people are familiar with the outsourcing of Payroll, but not many people understand the tax benefits and how much risk they can avoid by bundling everything with a PEO.
Feel free to reach me with questions, comments, or anything you deem appropriate.
Related articles
- How Can I Keep Up With Employment Regulations and Health Insurance Laws? (askiyiblog.org)
- 4 Ways A Small Company Differentiated Itself From The Big Boys (forbes.com)
- The Benefits and Pitfalls of Outsourcing Human Resources, Insurance, and Payroll (thehroblog.wordpress.com)
- How To Determine If Your Business Should Outsource Its Payroll (bleedartmedia.com)
All Things HR Laura 