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Unemployment Insurance - a Primer
By VICKY BROWN
So what is unemployment anyway? Well, it provides income assistance to individuals who have lost their job due to no fault of their own, are available to work, and generally are actively looking for work . The Federal government has an unemployment insurance program called (FUTA) and many states also have state based programs called (SUI).
The determination of UI benefits for California workers, involves a complex calculation. It includes total wages paid during the first four of the last five completed calendar quarters. If that all sounds very complicated, that’s because it is. Fortunately, you won’t need to know the details of the calculation – let’s leave that to the unemployment representatives.
Eligibility is tied to someone being unemployed due to no fault of their own, their availability to work, whether they are actively looking for work, and their ability to accept work if offered.
Now, as an employer, you have several responsibilities when it comes to unemployment insurance. Let’s break them down:
First, you’re required to pay both Federal Unemployment Tax Act (FUTA) and State Unemployment Tax Act (SUTA) taxes. FUTA is a federal tax that’s paid to the IRS, while SUTA is paid to your state unemployment agency. In California, this is the Employment Development Department or EDD.
Now, here’s something important to note: most employers can take a credit against their FUTA tax for amounts paid into state unemployment funds. This means you’re not double-taxed, but rather, the majority of your unemployment tax goes to the state fund.
“…As an employer, you also have the right to contest unemployment claims. If you believe a former employee shouldn’t be eligible for benefits…you can appeal the decision to award benefits.“
The amount you as an employer will have to pay is determined by a few factors, including the unemployment claims against our company. But keep in mind, you’re only required to pay into your state unemployment insurance account. Think of it as a savings account. When an employee’s unemployment (all or part) is charged against your company, the amount is taken from your unemployment insurance account.
You fund your account by paying a percentage rate on the first $7,000 in payroll wages for each employee. How much is charged to, or hits, your account is managed by a very complex set of rules and calculations – let’s just suffice to say, it’s not a 1 to 1 ratio. Your company’s rates will vary from year to year but in California, they’re generally between 3.4% and 6.2% of the wages you pay to your employees. The state will notify you annually of your rate, and when they do – be sure to update your payroll records.
Another key responsibility is responding to unemployment claims. When a former employee files for unemployment, you’ll receive a notice. It’s crucial that you respond promptly and accurately. Provide any requested information about the employee’s work history and the circumstances of their separation from your company. Your response can significantly impact whether the claim is approved or denied.
Lastly, remember that your unemployment tax rates can be affected by the number and frequency of claims against your company. This is why it’s so important to manage your workforce effectively and document any performance issues or policy violations that lead to terminations. The fewer approved claims against your company, the lower your unemployment tax rate is likely to be.
Now, let’s talk about the appeals process. Both employees and employers have rights when it comes to unemployment claims.
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If an employee’s claim for unemployment benefits is denied, they have the right to appeal that decision. They’ll need to file an appeal within a specific timeframe, usually within 30 days of the denial notice. The appeal process typically involves a hearing where both the employee and employer can present evidence and testimony.
As an employer, you also have the right to contest unemployment claims. If you believe a former employee shouldn’t be eligible for benefits – perhaps because they were fired for misconduct or voluntarily quit without good cause – you can appeal the decision to award benefits.
To contest a claim, you’ll need to respond to the initial claim notice with your reasons for objecting. If benefits are awarded despite your objection, you can then file an appeal. Like employee appeals, this process usually involves a hearing.
It’s important to note that the appeals process can be complex. If you’re dealing with a contentious unemployment claim or appeal, it might be worth consulting with an employment law attorney or an HR professional who specializes in this area.
Remember, the goal of the unemployment system is to provide a safety net for workers who lose their jobs through no fault of their own. As an employer, your role is to participate honestly and responsibly in this system, while also protecting your business interests.
By understanding your responsibilities and rights in the unemployment insurance process, you can better manage this aspect of your business and maintain a fair workplace for your employees.
It’s easy to get unemployment for your company. When you register with the state as an employer, they’ll assign you an unemployment number and set up an account for you. Unemployment is an automatic part of the company payroll taxes. So, there’s nothing additional you need to do to.
And those are the basics of unemployment.
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