Unemployment Insurance Vital Benefit Consideration

September 3, 2008
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With so much emphasize on health care, many employers pay little attention to another cost of having employees: unemployment insurance benefits. While this cost pales in comparison to health care, Workers’ Compensation, F.I.C.A. and others, it can be minimized with diligence to the details (where the devil resides).

Some employers do not know this is not a welfare benefit but one employees have to qualify for based on wages and reasons for being unemployed. A terminated employee is only entitled to unemployment insurance benefits if they are unemployed through no fault of their own.

An employee who “quits without good cause” or is “discharged for misconduct” is not entitled to benefits. These “legal” phrases have many years of court interpretation, but the employer’s answer to an initial claim will be a determining factor of whether benefits are charged against their account and impact costs for up to five years.

Assuring that employees discharged for misconduct or who quit without good cause do not impact unemployment insurance costs begins with how the employer records communications and documents before the employee leaves. If a claim is filed, the employer has the burden of proof to establish why the employee is no longer working.

Employers should respond in a timely manner with all documented records available in response to the initial claim filing. Failing to do so may result in benefits being charged to an employer’s account based solely on the statements by the employee.

Additionally, employers should pay attention to “determinations” from the state and file timely appeals if they believe them to be incorrect. There are several opportunities for appeal, all the way to the Supreme Court.  Most cases, though, are determined at lower administrative levels. These are opportunities for employers to appear in person with relevant witnesses, and an attorney is not required.

The maximum unemployment insurance tax rate an employer may pay in Michigan is 10.3 percent of the first $9,000 of wages to each employee. The rate is based on several factors, including the employer’s “experience” of benefits paid out vs. taxable payroll. The effects of one employee receiving benefits can impact an employer’s tax rate for five years.

Diligence in paying attention to the details can result in cost savings for the employer that will impact the company’s bottom line for many years.

Tom Cole is a principal with P3HR Consulting & Services LLC. He’s held previous positions as director of benefits & compensation for Amway (Alticor); specialist, Workers’ & Unemployment Compensation for General Motors; and CEO, general manager and vice president of human resources for several companies as a consultant.

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