Unemployment claims cause confusion and frustration. They require strict attention to deadlines and accurate responses. Even the most detailed employees can make honest mistakes, costing your company money.
Whether legitimate or not, unemployment claims are costly. A single unemployment claim against your business can raise your unemployment insurance premiums.
To control your unemployment insurance expenses, you need a trusted partner that can help you review unemployment claims and help your company reduce the number of claims. A Professional Employer Organization (PEO) saves you money by taking proactive measures to reduce the number of successful unemployment claims filed against your company.
Calculating Your Unemployment Insurance Expenses
How your unemployment rates are calculated might seem like a mystery. There are several factors at play including two taxes that your company pays to cover former employee's unemployment benefits.
The federal unemployment tax (FUTA) goes into a federal fund that the government oversees. This fund helps cover state unemployment programs. The state unemployment tax (SUTA) is your state's version. When an employee files an unemployment claim that is approved, SUTA helps cover their unemployment benefits.
Your company's unemployment claims history plays a big role in the calculation of your SUTA rate. The more unemployment claims you have filed against your company, the higher your rate. Without a trusted partner at your side, your company may not know what steps to take to reduce this rate. A PEO provides guidance and support.
Professional Employer Organizations
A PEO offers your company HR outsourcing services. Through a comprehensive plan, part of your services from a best-in-class PEO will include unemployment insurance administration.
When you partner with a PEO, your company joins the PEO's unemployment insurance coverage. Any future unemployment claims made against your company then fall against the PEO's account, not your own.
This can serve several purposes, not least of which is reducing your unemployment costs. Your PEO may have a lower SUTA rate, thus reducing your own unemployment insurance burden and saving you money. This is just the beginning.
How PEOs Control Unemployment Insurance Expenses
PEOs use several methods to control unemployment costs, which is just one of the many ways a PEO reduces your business costs. Each of these methods, taken as a whole, can greatly reduce your unemployment costs by partnering with a best-in-class PEO.
Object to invalid or suspect claims
One of the most time-consuming aspects of unemployment claims is reviewing and replying to claims filed by former employees. Reviewing the claim details and determining whether the claim is valid requires not only a keen eye for detail but also a clear understanding of employment laws. You cannot expect a single in-house HR employee to manage this entire process mistake-free.
Guide through documentation procedures
HR is all about proper documentation. If you don't document something correctly, it's almost like it never happened. If you do not properly document how an employee exited your company, it becomes extremely difficult to challenge an unemployment claim because you have no way to prove that the employee was terminated for cause and is ineligible for unemployment benefits.
When you have proper documentation, responding to invalid unemployment claims becomes simple. You have a paper trail of evidence that shows the former employee is not eligible for unemployment benefits.
Your PEO can help you document every termination and employee exit. This documentation may seem cumbersome, but it can prevent unnecessary unemployment claims from getting approved.
Another time-consuming aspect of unemployment claims is hearings. Sometimes after a former employee files an unemployment claim and your company responds, a hearing occurs. At the hearing, both parties have an opportunity to speak and present their case.
Making one wrong statement, even an innocent one, can sway the hearing in the former employee's favor, granting them unemployment benefits when they may not deserve them. This can also waste your company's resources. Working with a best-in-class PEO, the HR experts at your PEO will prepare the response to the former employee's unemployment claim and attend the hearing on your behalf. Having a seasoned representative at the hearing representing your company makes it more likely that you will succeed.
Alter your experience modifier rate
An experience modifier rate (EMR) plays a vital role in your unemployment insurance company's calculation of your premiums. The EMR takes into account your company's prior unemployment claims and the corresponding costs. The more claims your company has had filed against it, the higher your EMR, and the higher your SUTA rate.
Best-in-class PEOs actively manage their EMR, so it tends to be lower than what you could get on your own. The benefit here is that when you partner with a PEO, you join their unemployment insurance coverage and access their EMR. This means you can greatly reduce your SUTA rate by partnering with the right PEO.
PEOs Save Your Company Time and Money
By accessing an EMR lower than what your company could get on its own, you can better control your unemployment costs.
Partnering with a PEO gives you access to HR experts who specialize in contesting unemployment claims. By reviewing and responding to your company's unemployment claims, these experts can contest the former employee's unemployment claim, further reducing your burden.
The right PEO can help you save money through a comprehensive HR outsourcing service plan. This presents your business with a great way to control your unemployment costs.