How to Reduce Unemployment Claims

Published: May 2, 2023 by Steve Solovic

Most employers based in the U.S., including the District of Columbia, Puerto Rico, and the Virgin Islands, are required to pay unemployment insurance taxes to support qualifying employees. These funds are meant to provide a source of income to jobless workers who have lost their jobs through no fault of their own. Workers who are discharged due to willful misconduct or who resign without good cause attributable to the employer are generally not entitled to unemployment benefits. Employers can potentially control their unemployment tax rates by properly managing all separations, and in some cases reduce unemployment claims. As the claims win/loss ratio is one of the factors that could influence the SUTA tax rates for the employer, it is critically important to take the steps necessary to deal with this issue in a comprehensive way from pre-employment to termination and include policies proven to safeguard the company’s bottom line and experience rating. 

Discharge as a Last Resort

While collecting benefits is a right for an individual who lost their job through no fault of their own (i.e. lack of work or reduction in force), not every separation entitles a claimant to unemployment benefits. An employer has the right and the responsibility to contest claims to protect the company’s interests, especially when a meritless or fraudulent claim has been filed. Efforts to reduce unemployment costs must be taken seriously and approached with a comprehensive strategy.

When an employee is discharged, the cause of the discharge is a crucial fact to determine in the state adjudication procedure. One prudent way an employer can approach this course of action is to avoid discharges, especially in cases when other options are available, such as offering an alternative job to an employee who is facing a layoff. This improves retention and lowers turnover, as both factors influence the SUTA tax.

Rushing to terminate an employee who has given notice is never recommended, although an employer may believe it should be done to speed up the inevitability of finding someone new, training them, and maintaining operational efficiency as soon as possible. This could backfire and result in an unemployment claim being filed. By terminating an employee and not allowing them to work out their notice period, an employer has now become the moving party and has created a discharge without good cause, opening the door in some states for the employee to obtain unemployment benefits.

Proper procedures to follow when dealing with a leaving employee (notwithstanding the idea that some turnover may be “healthy” from a work culture perspective):

  • Allow the employee to either work through their notice OR provide them with the payment for that period if the employee can no longer be present on site
  • Allow the employee to rescind their notice if no replacement is available
  • Negotiate a deal to convince them to stay
  • Failure to honor the above may result in the allowance of UI benefits based on a discharge without good cause as there is no willful misconduct on the employee’s part

Follow Your Policies to a Tee When Discharge is Inevitable

There are cases in which discharging an employee is not only the best outcome but also the only potential outcome. When dealing with repeated and willful misconduct, where the employee has disregarded warnings, instructions or policies, a discharge must be made to protect the business and ensure that consistent progressive disciplinary policies are being met.

In cases like this, strict adherence to company policies and rules comes into play. These policies and rules should cover all the bases, starting with the proper documentation maintained throughout the course of employment, including the circumstances of the separation. No less important are the policies on discharge relevant in a particular state, which ought to be monitored closely and interpreted with full understanding to enable employers to reduce unemployment charges, as the burden of proof, when contesting a claim made by former employees, is on the employer.

To be able to substantiate that the discharge was due to willful misconduct, employers should submit documentation showing that:

  1. The policy that was violated is in writing and contained within the company handbook;
  1. The employee received and signed acknowledgment for receipt of the handbook;
  1. The employee received warnings for previous violations of the policy (if not an immediately terminable offense, like theft);
  1. The warning clearly indicated that if the employee continued to violate the policy that they may be terminated from employment.

If responses for all four of these items are available and provided to the State agency upon receipt of the initial claim for unemployment benefits, the chances of receiving a favorable determination and the employee being found ineligible to receive benefits will greatly increase.

Legal Compliance Goes a Long Way

As the state-specific policies around unemployment insurance benefits may significantly differ from one another, employers are facing a task rather difficult to master, especially when operating in multiple states. In order to further state unemployment tax knowledge, staff training must be a priority, and part of the company UI strategy.

Staying informed on evolving state unemployment laws and regulations will reduce unemployment claims costs and ultimately help your bottom line.

Outsource Management to Reduce Unemployment Claims

Protecting the company and its unemployment tax experience rating depends on its management team and its HR members directly involved in the employment and separation issues. It is vital that all the personnel involved in receiving, documenting, and processing separations are aware of possible pitfalls, and have a thorough knowledge of the state UI guidelines. Still, human errors are possible, and regulations are complex and ever changing, which makes utilization of an unemployment insurance management solution a reliable way to secure support and relevant expertise in these matters. The staff training and legislation updates cover just one portion of the comprehensive automated platform, as its features are exhaustive and touch upon all aspects of UI management.

Expertise and targeted process automation in this industry is a dependable method proven to ensure efficiency and compliance, eliminate paperwork, reduce unemployment claims, prevent incorrect payment of benefits, and improve overall performance.

By outsourcing unemployment management to a trustworthy partner, you will be able to transform the way you handle UI claims and focus on bigger, more pressing business challenges.

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