Unemployment Insurance (UI), otherwise known as unemployment benefits, refers to an insurance provided by the state to make weekly monetary payments to eligible individuals if they have lost their job. Someone who voluntarily quits the job or gets fired because of a justified reason may not be eligible to claim UI benefits.
Although unemployment claims insurance operates under federal law, states have the mandate to administer their own respective UI programs. The state governments have the primary responsibility to pay the unemployment insurance benefits, which they finance through the collection of certain payroll taxes.
Determining Eligibility
The person who wants to claim UI benefits should be eligible according to the guidelines set by their state. In general, you are eligible for unemployment insurance benefits if you:
Lost your job without any fault of your own
This typically means that you were separated from the job because of the unavailability of work.
Meet the requirements of work and wage
You should be able to meet the state requirements for the time worked or wages earned during the base period (the established time period of employment). In most states, the base period is generally the first four completed calendar quarters out of the last five prior quarters to the time you filed the UI claim.
Meet additional requirements imposed by the state
You must find out the specific additional requirements that may be included in your state’s UI program.
End-to-End UI Claims Process from an Employer’s Perspective
As an employer, your responsibility in the unemployment claims process begins from the moment you hire an employee, not from the time they leave the job. After hiring new employees, you must report this information to the state. You are required to pay state and federal unemployment taxes for every employee working for you. The UI program of your state is funded from these taxes.
State Unemployment Tax Act or SUTA is usually an employee-only tax, but employee contributions may also be required under some state UI programs. Federal Unemployment Tax Act or FUTA is at present an employee-only tax. Each state will determine its own wage base and the tax rates will also differ for each state.
Employers are not required to pay an unemployment tax on the payments made to independent contractors because they are not qualified to claim unemployment benefits.
What is Required of the Employer When a UI Claim is Filed?
When an ex-employee files an unemployment benefits claim, the state will send you a notice. This “Notice of UI Claim Filed” is only sent to the most recent employer of the said employee. As an employer, you will indirectly pay for your former employee’s unemployment insurance claim through your payment of SUTA and FUTA taxes.
The state will charge these benefit payments to your employer taxation account. The higher the volume of approved unemployment claims in your state, the higher your contribution to unemployment taxes will be. However, exceptions may be made in special circumstances. For instance, in some states, any mass layoffs resulting from the Covid-19 crisis may not impact SUTA tax accounts. Details of pandemic-related mass layoff limits may vary for each state.
What Steps Employers Can Take in Response to UI Claims
As an employer, you should be prepared to take necessary action after you receive a notice from the state for an unemployment claim. Your response will vary depending on whether or not you plan to contest the unemployment claim. Here is an overview of the employer’s responsibility for contesting or accepting UI claims and the reasons for such action.
Employer Decides to Accept the Unemployment Claim
While filing an unemployment claim, your former employee will provide the relevant information regarding the claim. If the UI claim is legitimate and the information provided by the person is factually correct, you might decide against contesting the claim. Your decision to accept an unemployment insurance claim usually means that no further action is required from your end.
Common reasons for accepting unemployment claims are:
- You removed the employee because of lack of work.
- You removed the employee due to financial difficulties.
- The employee quit or was terminated because of your wrong action.
When you accept an unemployment claim, it does not automatically mean that the claimant will receive the benefits. The state will make the final decision. If the ex-employee’s application is unfit, the state could deny the claim.
The state will send you a determination letter, which informs the reasons for their decision on the claim, and any charges it will make towards your account. If the state has denied the claimant’s unemployment insurance claim, they will have the right to appeal this decision.
Employer Decides to Contest the Unemployment Claim
Depending on the situation, you may choose to contest an unemployment benefits claim. If you win, it can save you on the unemployment tax rates. Common reasons contesting unemployment claims include:
- You removed the employee due to their misconduct.
- The employee voluntarily quit to take up a new job that did not materialize.
- The claim form of the employee contains false information.
- The claimant was an independent contractor.
- It is an instance of unemployment fraud.
When you contest an employment benefits claim, you must respond to the unemployment department in your state. Your ability to contest may be forfeited if you fail to respond within the time limit mentioned in the notice.
It is best to support your decision with the maximum possible evidence, which you must submit to the state. Include information related to the reasons for terminating the employee, their period of employment, job title, compensation, and information about the nature of your business. Maintaining payroll and employment records is important even after a worker leaves so that you can provide the necessary information to the state in these situations.
You may be required to attend an unemployment insurance hearing when you contest a UI claim. You may also receive a request from the state for additional information. Once the state makes its final decision, it will be communicated through a determination letter. If you disagree with it, you can appeal the decision within a certain time frame.
Employee Misclassification and Unemployment Claims
The UI claim process may sometimes lead to the issue of worker misclassification. While independent contractors are not qualified to receive unemployment benefits, the classification of a worker as an employee or independent contractor must be followed according to the law in your state. If you misclassify someone as an independent contractor when according to the legal definition of their duties performed they should have been classified as a worker, from the legal perspective:
- You denied the worker the opportunity to enroll in employee benefit programs, such as retirement plans and health insurance.
- You denied the worker their right to receive overtime wages.
- You failed to contribute the required payroll taxes.
Worker misclassification may lead to the imposition of penalties, back taxes, and interest. Your state will demand back payments for workers’ comp premiums and unemployment insurance. Considering these consequences, it is vital to accurately classify your employees from the moment they are hired.
Types of Unemployment Claims
Different types of temporary payments are provided under the unemployment insurance program to eligible individuals as follows:
State Unemployment Insurance
The unemployment insurance program of the state offers unemployment benefits to individuals who became unemployed for no fault of their own (in accordance with the state law) and fulfills other eligibility conditions imposed by the state.
Disaster Unemployment Assistance
Individuals who suffered a job loss or an interruption to their job as a direct consequence of a disaster declared by the US President may be eligible for financial assistance under the Disaster Unemployment Assistance program.
Federal Employee Unemployment Compensation
Former federal employees in civilian jobs who are unemployed may qualify for unemployment compensation under this program if they fulfill all the eligibility requirements.
Ex-Service Members Unemployment Compensation
Eligible former members of the US military can receive benefits under the Ex-Service Members Unemployment Compensation program.
Trade Readjustment Allowances
These benefits provide income support to individuals whose jobs were impacted because of imports from foreign countries and who have already exhausted their eligible unemployment compensation.
Self-Employment Assistance
This program provides an opportunity for dislocated workers to become self-employed through self-employment assistance. The program’s goal is to provide early re-employment.
Unemployment Insurance Extended Benefits
Employees may be eligible for extended benefits after they have exhausted their standard unemployment benefits during conditions of high unemployment.
Pandemic Unemployment Claims
In addition to the regular unemployment benefits, the CARES Act created provisions for additional relief to workers in the backdrop of the Covid-19 pandemic. Under the new law, additional unemployment benefits were offered as part of the FPUC (Federal Pandemic Unemployment Compensation) program. The exact benefits would vary according to how each state decided to implement the provisions of the CARES Act.
Employers should be aware that if one or more of their employees quit because they preferred to benefit from the unemployment compensation offered under the CARES Act, they would usually be considered ineligible for regular unemployment benefits or Pandemic Unemployment Assistance (PUA).
Unemployment Claims Management Services, Automation, and Your Business
A key challenge for employers with regard to unemployment insurance claims is that not only do the regulations vary for each state, but the compliance requirements related to UI continue to change frequently as well. When employers choose to hire the expertise of a dedicated UI claims management services provider, they get the benefits of their focused knowledge, experience, and cutting-edge technology.
The expertise of a resourceful unemployment claims management solutions firm and their automation capabilities will save time and costs, and will minimize the risk of errors while processing unemployment claims. Most importantly, the service provider’s updated knowledge of each state’s UI laws and regulations, and their ability to handle hearings efficiently can help employers remain compliant and minimize their costs of unemployment claims, claims processing costs, and unemployment taxes.
Resolving Claim Challenges Quickly and Proactively
Handling unemployment insurance claims on your own can be complicated for any employer, irrespective of the size or scale of your business. Whether it is one claimant or several, the stakes are always high for the businesses. This is where a highly rated UI claims management expert like Quentelle can save a significant amount of time and money for your business.
Quentelle can quickly deploy all the required skills, tools, and resources to resolve unemployment claim challenges in the fastest, most efficient, and most cost-effective way possible. As an employer, you can focus on your business, while at the same time, have control over the decisions to accept, contest, or appeal the claims and the follow-up strategy.
Auditing Claims to Minimize Errors
Maintaining unemployment claims history and auditing the records to identify potential mistakes is difficult for most companies unless they have a professional claims management service provider that handles everything efficiently. Inability to audit unemployment claims history can be costly for your business because the state department can make errors in their computation, the employer can make overpayment for a claim, or you could be charged at a higher tax rate than you should be.
Employers typically don’t have the systems, expertise, or a dedicated team to address ongoing UI claims and auditing of the claim charges and taxes. With help from Quentelle, employers can receive dependable auditing services. The unemployment cost management specialists at Quentelle can also help businesses put in place new methods and controls to ensure process rationalization and error minimization.
Automation to Drive Higher Efficiency
Advanced automated systems at an unemployment insurance claim management service provider such as Quentelle are designed to make the claims administration process faster, easier, and cost-effective. The latest software-based solutions allow for careful monitoring and execution of UI claims management at every stage and the necessary tax rate verification. At the same time, Quentelle is equipped to maintain the data in a completely secure and confidential manner, while staying compliant with the state and federal data retention and privacy guidelines.
Schedule a Demo with Quentelle
To learn more about Quentelle’s industry-leading solutions for employers, and to explore a win-win partnership that will help navigate the costly and complicated landscape of unemployment, reach out to us today. You can schedule a demo with our unemployment cost management team at a convenient time. Call us at (888) 565-5515 or simply fill out this online contact form and we will respond shortly.