Understanding State Unemployment Insurance (SUI)
State unemployment insurance provides a safety network for workers who are laid off or terminated from their jobs without cause. For example, a company might scale back their workforce in a specific area or go out of business. Unemployment benefits help support workers while they search for their next opportunity. Workers who quit their jobs or who are fired for performance-related issues are typically not eligible for unemployment. Employers primarily fund unemployment insurance through contributions for each eligible employee. However, state unemployment insurance rates vary by state and other factors – and many companies aren't taking the necessary steps to optimize their contributions.
Managing Variable Contribution Rates
State unemployment insurance rates are determined by the state in which your business operates. Each company's contribution is also affected by how many former employees have opened unemployment insurance claims. The more claims that are filed, the higher your rate will be in effect. Promptly responding to claims when they're filed – particularly by former employees who are not actually eligible for unemployment benefits – is key to keeping your rates as low as they can go. By proactively managing your state unemployment insurance contributions and responses, it's possible to potentially save hundreds of dollars per employee.
Establish a baseline for your unemployment insurance rate using this SUI calculator.
Responding to Claim
How your business responds to filed UI claims can have an important impact on your SUI rate. When a former employee issues a claim, the state will typically send out a request for more information to any employers the person has worked for in the past 15 months (or roughly five quarters). At that time, the employer can respond by validating the claim or contesting it. Based on the information provided, the state will make a determination, which the employee or employer can appeal. During an appeal – and throughout the process – it's critical to have information on hand relative to person's employment, including:
- Employee's basic information, including dates of hire and termination;
- Details around why an employee left: were they let go, fired with cause, or did they quit?;
- Any documentation to back up the cause of separation. For example, if an employee quit, they may have submitted a resignation letter.
Determining How to Handle SUI
Companies need an active strategy for managing their SUI contributions and have programs in place. Effectively responding to non-qualified claims for unemployment insurance can keep rates as low as possible. This requires a three-part strategy:
- Understanding the company's obligations based on state guidelines, current UI levels accessed by former employees, and upcoming changes to regulations;
- Maintaining documentation as required by law;
- Having access to the documentation, expertise and time to respond to claims and to drive the appeals process when required.
While some companies handle these functions in-house, busy HR departments don't always have the bandwidth to effectively manage their SUI program and responses. In addition, complicated cases may require additional expertise and bringing in an employment lawyer by the hour can quickly become expensive. Another strategy is leveraging an outsourced SUI service which will ensure that businesses stay in compliance with state regulations and have a program in place to evaluate and respond to claims when they arise.