Posted on October 28, 2013

State Unemployment Insurance and Its Impact on Employers

_From the HR Pros of the HR Support Center

Jobless claims are nothing new for employers large and small. Particularly between 2008 and 2010, the unemployment rate skyrocketed in many parts of the country and created a demand for unemployment insurance support. The stalled economy created a surplus of unemployed and underemployed individuals, as well as many employers who hesitated to make job offers due to the instability of the economy.

Types of unemployment benefits

State unemployment insurance (SUI) benefits are available for workers who become unemployed through no fault of their own. There are two types of unemployment benefits available:

* Regular State Unemployment Insurance
* Extended Unemployment Insurance

Regular State Unemployment Benefits are provided by state unemployment insurance programs and are typically available for up to twenty-six weeks. Extended Unemployment Benefits are provided through federal programs that are administered by the states, and are available to individuals who have exhausted their regular unemployment insurance benefits during periods of high unemployment. There are specific criteria, based on calculations of a given state’s unemployment rate, which ultimately determine when the unemployment benefits will be extended. The weekly benefit amount of extended unemployment benefits is typically the same dollar amount that was paid to the recipient during the initial twenty-six weeks of unemployment benefits.

Criteria for receiving unemployment benefits

Unemployed workers who receive unemployment benefits have a definitive timeline impacting the following:

* Searching for a replacement job
* Downsizing lifestyle
* Withdrawing from savings
* Withdrawing/borrowing from retirement plans

The latter two may negatively impact the individual’s retirement nest egg as it is unpredictable whether that individual will ever be able to recoup the money that was withdrawn, or catch up to his or her previously set savings goals in order to prepare for retirement.

Impact on employers

Employers face a different set of factors that create financial hurdles. In a time of limited financial mobility, employers must use extreme caution in hiring practices, ensuring and justifying that a position truly needs to be filled, as well as considering the worst case scenario: that the candidate ultimately is not a good match for the organization and he or she collects unemployment benefits.

Employers must also concern themselves with former employees who have moved on to other jobs; if these individuals are laid off, they potentially could collect state unemployment benefits against both the most recent employer as well as the prior employer, depending on the duration of employment with each respective organization as well as the timeframe in which the individual applied for unemployment insurance benefits.

Unemployment insurance is typically calculated against an individual’s employment history for the past year prior to his or her unemployment insurance claim filing date. This means that a worker who applies for and is awarded unemployment benefits can move his former employer (or multiple former employers, when there are several over the state’s base period) into a higher unemployment insurance tax bracket, often for several years after the claim is initiated. With so many unemployed and underemployed individuals being awarded unemployment benefits, a vast number of employers are currently experiencing a surge in their unemployment insurance tax bracket, adding financial stress to an already stretched budget.

Helping ensure a good fit

No employer can foresee the future as far as an employee’s long term fit with an organization or the economic climate as it pertains to individual industries. However, employers can alleviate some of the “sticker shock” associated with burgeoning unemployment insurance tax brackets by utilizing tried and proven hiring practices. Ensuring that a selected candidate has met or exceeded the following will assist an organization in its hiring practices:

* Credentials
* Capabilities
* Qualifications for the position for which he or she has applied
* Fit with organizational culture
* Provable professional track record
* References and background verification

Utilizing consistent practices in hiring will help alleviate mismatched hires that are not a good fit for the role or the organization.

Hiring and recruitment are a high expense category for employers, but taking the time to be thoughtful and consistent in ensuring that best practices are followed will be an investment into the organization’s future. This may also decrease turnover, helping to prevent a severe increase in the employer’s SUI rates.


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