If your inbox has felt a little noisier lately—more “claims” for employees who are still on your payroll, more agency notices that don’t square with reality—you’re not imagining it. Unemployment insurance (UI) fraud remains elevated, and several states have seen fresh surges this month. In Texas, for example, officials flagged a sharp jump in suspicious claims in early September 2025, doubling normal weekly volumes and prompting an employer-facing “Slam the Scam” campaign. Local law enforcement in Connecticut reported a concurrent uptick in identity-based UI fraud attempts.
This post gives HR and payroll leaders a practical refresher on how UI works—funding, claims flow, benefit payments, and tax rate issuance—plus the latest fraud and improper payment statistics from the U.S. Department of Labor (DOL) and the Government Accountability Office (GAO), and how the National Association of State Workforce Agencies (NASWA) Integrity Data Hub supports prevention.
UI in one page: from claim to tax rate
1) A worker separates and files a claim. A claim is filed with the state where the work was performed. The state requests wage and separation information from the last employer(s). Timely, accurate employer responses are critical—silence makes you an easier target for impostors and questionable claims. (States often use a short response window—e.g., 10–14 days.)
2) Eligibility determination and payment. The state adjudicates eligibility (able/available for work, not disqualified due to misconduct, etc.). If approved, weekly benefits are paid from the liable employers’ UI trust fund.
3) Employer charging and trust fund financing. With rare exceptions, employers fund unemployment insurance. You pay state unemployment insurance (SUI) contributions and a small federal unemployment (FUTA) tax that supports administration and federal backstops. States “experience-rate” employers—your future rate goes up or down based on your layoff history and benefit charges associated with your account.
- Experience rating is universal in state law: it allocates costs more fairly and incentivizes employment stability.
- Who pays? In almost all states, only employers contribute. Three states—Alaska, New Jersey, and Pennsylvania—also require employee contributions to the UI fund but their cost is minimal by comparison to employers’ costs.
- FUTA framework: Employers pay FUTA on a limited federal wage base (credit reductions can apply in certain circumstances).
4) Annual rate notice. Each year, the state issues your UI tax rate reflecting your experience, the trust fund’s health, and statutory schedules. Staying on top of charges tied to your account—and protesting those that don’t belong—directly affects the rate you’ll receive next cycle.
The numbers: Improper Payments and Fraud
Let’s keep two concepts straight:
- Improper payments (too much, too little, or paid to the wrong individual under program rules)
- Fraud (a subset of improper payments that involve intentional misrepresentation)
DOL’s current national improper payment snapshot shows the UI improper payment rate at roughly 14–15% using the latest three-year measurement window (July 1, 2021 – June 30, 2024). The department’s public dashboard pegs the 2024 national improper payment rate at 14.41%.
DOL’s longitudinal data illustrate the pandemic spike and gradual normalization: improper payment rates exceeded 19% in 2021 and 21% in 2022 before easing into the mid-teens in 2023–2024. The dollars involved are significant—tens of billions in benefits with mid-teens percent improper payment rates. Not every improper payment is fraud, but fraud risk is a substantial driver.
GAO’s pandemic-era fraud estimate underscores the magnitude of the challenge: 11–15% of total UI benefits paid during the pandemic were likely fraudulent. That wide band reflects data gaps and varying state capabilities, but even the low end is staggering.
Complementing GAO’s work, the DOL Office of Inspector General (OIG) has estimated at least $191 billion in potentially improper pandemic UI payments, with a significant share attributable to fraud; only a small fraction has been recovered to date.
Why Unemployment Fraud is Flaring—Again
After the historic pandemic waves, states tightened identity proofing, cross-matches, and analytics. But criminal tactics evolve, stolen identities are still plentiful, and the impact of one inattentive employer response can be expensive. The recent Texas spike in suspicious claims and fresh law-enforcement actions against UI fraud rings show the threat is persistent and opportunistic.
How States (and You) Fight Back: NASWA’s Integrity Data Hub
A major line of defense is the NASWA Integrity Data Hub (IDH)—a multistate, secure platform that gives state agencies advanced cross-matching and analytics to flag suspicious claims (e.g., identity anomalies, suspicious IP/device patterns, out-of-state overlaps) before money leaves the fund. The IDH is designed to be accessible to states with different technology maturity and is a cornerstone of the national integrity strategy.
DOL has encouraged state participation, funding integrity work (e.g., tiger teams, identity proofing, analytics) and stressing that program integrity must be balanced with equitable access for eligible claimants. Several states have publicly highlighted the IDH as part of their modernization and integrity roadmaps.
Practical Steps for HR and Payroll
- Lock down identity data. Educate staff about phishing and payroll system hygiene; many fraudulent claims begin with compromised PII harvested from employers or vendors.
- Respond to claims fast—and completely. Build a repeatable intake process to meet state deadlines (often within two weeks). In Texas, for example, scammers bank on employers missing the response window.
- Audit your charge statements. Reconcile agency charges to actual separations. Protest anything that doesn’t match your records—late protests can cement charges that inflate next year’s rate.
- Use SIDES/electronic exchanges where available. State Information Data Exchange System (SIDES) tools standardize questions and cut cycle time, which improves determinations and reduces erroneous charges.
- Coordinate with your payroll provider. Ensure your SUI account structure, locations, and FEINs are accurate in every state to avoid misapplied wages/charges that can skew experience ratings. (Remember, future tax rates are experience-driven.)
- Report suspected fraud immediately. Most states now offer dedicated fraud portals integrated with IDH workflows; reporting helps stop serial claims that hop from employer to employer.
Bottom Line
UI is a social insurance program—funded primarily by employers—that protects workers and stabilizes the economy. But persistently high improper payment rates (≈14–15% for 2024) and credible fraud estimates (11–15% during the pandemic) show integrity risks are still material. Recent state-level spikes prove the threat isn’t over. Your best defense is disciplined claim response, tight payroll controls, and active monitoring of charges—paired with state tools like NASWA’s Integrity Data Hub that are built to catch the bad actors before they reach your trust fund.