While many employers consider unemployment taxes a cost of doing business, expenses related to unemployment insurance are usually far higher than just the amount of an unemployment claim. Unemployment tax rates vary from state to state, but the more claims made against a business, the higher the unemployment tax bill, making it important for employers to take different steps in order to control unemployment tax costs. For instance, they should always carefully determine if former employees are eligible for unemployment benefits and evaluate whether or not to contest an unemployment claim.
Receiving and responding to unemployment insurance claims online can save employers time and money as well as prevent potential increases in the tax amount. To that end, they can use the State Information Data Exchange System (SIDES) to respond to unemployment insurance information requests fully while meeting tight state deadlines. This web-based system allows electronic transmission of information requests from UI agencies to employers and Third Party Administrators (TPAs), as well as transmission of replies containing the requested information back to the UI agencies, thus providing employers with different SIDES benefits.
State Information Data Exchange System Overview
State Information Data Exchange System (SIDES) and SIDES E-Response are developed through a strategic partnership between the U.S. Department of Labor (DOL) and state UI agencies, the National Association of State Workforce Agencies (NASWA). One of the main SIDES benefits is that it is free of charge for employers in addition to being a secure, electronic and nationally-standardized format used for responding to UI information requests, attaching documentation when needed and receiving a date-stamped confirmation of receipt.
SIDES E-Response is a website that provides an easy and efficient way to respond to UI information requests from state UI agencies. On the other hand, SIDES is a more automated data-exchange interface between employers’ IT systems and SIDES, designed for employers and TPAs who typically deal with more than 30 UI information requests per week or those operating in multiple states. As such, SIDES is best suited for employers and TPAs who typically deal with a large volume of UI information requests. Currently, employers and TPAs use SIDES to exchange separation information with 50 states and territories in a standard format.
Unemployment Insurance Improper Payments
UI improper payments occur when unemployment insurance benefits are paid to a claimant who is later determined not to have been eligible or entitled to those benefits. As a result, UI overpayments negatively impact employers’ bottom lines.
One of the common causes of UI improper payments is misreported benefit year earnings (BYE), referring to a failure of claimants to report new income or work. According to US DOL’s 2020 Benefit Accuracy Measurement (BAM) report, misreported BYE was one of the nine primary causes of unemployment insurance overpayment.
In addition to this, UI claimants fail to comply with work search requirements, causing improper payments. States require most UI claimants to actively search for work while receiving UI benefits, but they fail to adhere to these requirements for a variety of reasons, including a lack of understanding or inadequate documentation of work search activities.
Another reason for UI improper payments is separation issues occurring when UI claimants are paid and it is later discovered they are ineligible for UI benefits because of the circumstances of their separation from previous employment. Separation issues arise when employers or their TPAs do not provide timely information about a claimant and the claimant’s reason for separation from the employer. By law, states are required to make a decision about a claimant’s UI eligibility if the employer does not provide timely information and the claimant is otherwise eligible for benefits. To combat this issue, employers can use SIDES and ensure the quick exchange of information between them, UI agencies and TPAs.
SIDES Benefits
UI improper payments can negatively impact employers’ bottom lines and many of them can be prevented by receiving timely and accurate information using SIDES or SIDES E-Response. Apart from offering significant administrative cost savings, other SIDES benefits for employers are:
- Providing an electronic, nationally standardized data format;
- Ensuring the exchange of complete and valid information with data checks;
- Allowing more time to gather information leading to complete and timely responses;
- Faster requests for information;
- Providing proof that a timely reply was processed with confirmation receipts;
- Reducing follow-up phone calls and correspondence;
- Having multiple layers of security implemented to the highest standards;
- Elimination of delays related to paper mail delivery; and
- Improving unemployment fraud detection.
Keeping Unemployment Insurance Costs Low
Preventing unemployment expenses is an ongoing process that involves a number of proactive steps that employers should take, such as maintaining proper documentation, keeping up to date with state and federal unemployment regulations and providing timely and actionable feedback to employees to prevent issues with potentially unfavorable results. Furthermore, outsourcing unemployment claims management allows employers to eliminate paperwork, deadlines and ever-changing regulations while implementing strategies to lower their UI tax exposure. Such an approach in combination with SIDES benefits ensures improved efficiency of UI processes, significant cost savings, prevention of improper payments, and low UI tax rates.