Jessica Miller-Merrell | , , , ,| By
For a list of unemployment benefit amount by state and other UI resources, click here.
Unemployment numbers are at some their lowest rates since pre-recession levels. Our economy is strong, however, unemployment insurance remains a cost that employers and businesses should evaluate and understand in order to remain profitable and growing.
The History of Unemployment Benefits
Unemployment insurance benefits first appeared in Wisconsin in 1932 as part of an effort to provide relief to workers who were unemployed as a result of the 1929 financial collapse. Six other states followed suit before the first federal unemployment insurance program was created as part of the Social Security Act of 1935. By 1937, every state in the Union and the then-territories of Alaska and Hawaii had enacted their own unemployment insurance programs.
Unemployment insurance benefits are weekly benefit compensation for individuals who have found themselves between jobs, whether voluntarily or involuntarily. These benefits are designed to bridge the gap between jobs until that person finds their next job opportunity. The length a state offers unemployment insurance benefits varies. Most offer the benefit for no more than a period of 26 weeks, however 9 states offer more or less than the 26 week standard. Unemployment benefits are designed to provide the former employee benefits of 40-50% of their pay. Weekly unemployment insurance benefits are determined by state with the exception of the federal programs in the District of Columbia, Puerto Rico and United States Virgin Islands.
When it comes to unemployment insurance, there are two different types of unemployment tax 1) state and 2) federal.
Fixed and Managed Costs: Unemployment Insurance Taxes
State Unemployment Insurance tax rates are also referred to as STU or SUTA rates and percentages are assigned annually by the department of labor. Theses are managed costs meaning unemployment claims and benefits that are awarded to former employees: the more STU, the more your business will be responsible for paying.
Federal Unemployment Insurance tax also referred to as FUTA, is a flat and fixed cost of 6.0%. The tax applies only to the first $7,000 of income per employee. Assuming that your company is paying 0.6% and every employee makes at least $7,000 per year this tax only comes to $42 per year per employee.
How Former Employees File for Unemployment Insurance Benefits
Individuals are eligible to file for an unemployment insurance claim when they are no longer employed and meet state specific criteria about their employment or employment departure. Individuals file their claims with their unemployment benefits with their state’s Department of Labor offices either in person or online and must provide information about their termination, job and dates of employment.
Unemployment Claim Requirements Are State Specific
State specific requirements vary. For example, in Washington you must meet the following minimum unemployment insurance criteria:
- You must have worked in the state of Washington the last 18 months
- You must have worked at least 680 hours in your base year
- At least some wages must have been earned in Washington, unless you recently left the military and are currently located in Washington state
- You are not currently employed
4 Unemployment Claim Outcomes for Employers
Depending on claim circumstances and information gathered, the individual filing the claim will receive 1 of 4 different outcomes:
- The claimant is awarded UI immediately after a state-specified waiting period
- The claim is denied and the claimant does nothing
- A hearing is scheduled for employer and claimant administered by an Administrative Law Judge or ALJ
- The claim is denied and the claimant files an appeal
What is an Unemployment Hearing?
An unemployment hearing is awarded if it is determined that more information is needed from one or more sides at a scheduled time. The ALJ facilitates the hearing whether in person or by phone. An employer representative must be present during the hearing to answer questions about the ex-employee. The claimant must also be present during the hearing and will be asked a series of questions about their employment, job and situations regarding their termination.
The employer should have already submitted the requested information to the DOL regarding the unemployment insurance claim. This could be a copy of the employee’s resignation letter, a statement from their supervisor and/or signed documentation on the reason the individual was terminated whether voluntarily or involuntarily.
During the hearing, the employer should be prepared to answer questions about the claimant’s job title, history and reasons that led to the termination. They should also be prepared to answer questions about their own employment, experience and why they are representing their employer for the hearing.
Benefits Award and Denial Process
If unemployment benefits are awarded, the claimant will have to actively report their job search activities weekly and are paid using a state debit card or direct deposit. The employer’s state UI insurance will be impacted depending on the number of UI awards, length and amount.
If the unemployment claim is denied by the ALJ, the claimant can file an appeal within 10-30 days from the date of denial. Claimants must present documentation, additional information and demonstrate records of their job search while they are in the appeals process. Employers are notified of the appeal by mail.
Two Biggest Misconceptions about Unemployment Process for Employers
One of the biggest misconceptions about unemployment insurance is that it is only awarded to claimants who have been involuntarily terminated. Many business owners and leaders falsely believe that someone who voluntarily quits can’t be awarded unemployment benefits.
If an employee has resigned from work they will be asked to provide evidence, statements and information as to why they resigned. They are asked to establish “good cause” as to why they felt they had to leave. Good cause could be that the claimant was threatened at work, harassed or forced to voluntarily resign. Based on this information, the claimant could be awarded UI benefits due to “good cause” even if they left the job of their own accord.
The second misconception is that employers don’t have to provide documentation and/or attend the hearing as requested. This is incorrect. If an employer representative fails to attend the hearing whether by phone or in person, the claimant will be awarded UI benefits. The process for providing documentation is very detail orientated which is why many employers choose to outsource this process to an unemployment management claims service.
Employers must educate themselves also on the unemployment process or work with an expert. Otherwise, they are literally throwing money out the window. While there are circumstances I’ve been personally involved in to not fight unemployment claims, I advocate focusing on looking at the bigger picture in terms of employers costs. For example, it might be better served to award certain exiting employees a severance as an alternative to UI to help lower managed costs especially if your UI claims are exceptional high.
For a list of unemployment benefits amount by state and other UI resources, click here.