Employers who are facing increasing unemployment insurance (UI) rates need to be on the defense. It’s a good policy to stay on top of every claim against your unemployment reserve account. How? Read every notice and follow up on the claims that you dispute. Don’t fall into the mindset that if you fire employees, you have to let them collect unemployment.
Depending on the circumstances of the termination, the employees may be entitled to benefits. But if not, take the time to fight claims or you’ll pay for them with higher unemployment insurance rates.
Besides fighting questionable claims, there may be another way to reduce your rate.
Currently, about half the states allow employers to “buy-down” their rates with voluntary contributions. First, keep in mind how rates are determined. Over a period of one to four years, rates are calculated by the ratio of your reserve balance (which is generally described as your UI contributions during your company’s history, minus benefits paid out) to your taxable payroll. Because of the historical nature of some of this data, your rate today can still be affected by what happened many years ago, even if in recent years, you’ve had very few claims against your reserve.
Suppose your company experienced a mass layoff in the 1980s, during which dozens of former employees collected benefits for the maximum time. Decades later, your company may still have a negative balance in your reserve account. Certain states, like Pennsylvania and New York, allow employers to write-off these negative balances after three years. If your reserve account has a negative balance and your state doesn’t allow write-offs, you may be looking at high UI rates for years to come.
In Texas voluntary contributions ARE allowed to reduce your UI rate. See the excerpt below from Texas Workforce Commission:
Texas employers have the option of voluntarily paying all or part of their share of employer unemployment benefit chargebacksor unemployment benefits paid to their former employees, in order to lower their state unemployment tax rate. If you elect to pay all or part of your chargebacks, the Texas Workforce Commission recalculates your effective tax rate and issues a revised tax rate notice.
Each December, TWC notifies employers of their tax rate for the coming year. We include a Voluntary Contribution Election (Form C-24) with the annual Tax Rate Notice (Form C-22) for accounts charged with unemployment benefits within the three-year computation period. Each employer can analyze their individual account history and determine whether or not the voluntary contribution election is cost effective. The desired contribution amount must be postmarked or received by TWC no more than 60 calendar days after the employer’s annual Tax Rate Notice date.
If you want to know more about unemployment voluntary contributions, contact PayVision Online today. We are payroll professionals who can help you make your paydays and payroll processes Worry Free!