What's the Effect of an Unemployment Claim on Employer's UI Rate
My question involves unemployment benefits for the state of: CA
Hello,
I'm a small business owner with 10 employees, and I'm wondering how much my UI rates (both fed and state) would increase if a UI claim is filed.
My current payroll is about $15,000 a month. I've got a part-time employee who I'd like to lay off, and he will definitely file for unemployment if/when this occurs.
He only works a few days a month, his gross wages are $200.00/month. If my rates would go up significantly, I think I'd just keep him on instead of paying higher UI rates. This may seem nonsensical, but I'm struggling to keep the boat afloat and can't afford any more expenses right now.
I've been trying all week to contact EDD by phone and email but cannot get through by phone and have not heard back from email. I understand that no one will be able to tell me exactly how much the increase will be, but I'm just looking for a ballpark figure. If it matters, I've been in business for 14 years and have never had a UI claim filed against me. Thank you for any help on this.
Re: UI Claim Effect on Employer's UI Rate
Well, even if your rate DOES go up, it wouldn't be until at least 2011 and maybe not until 2012. And since only the first $7K in wages is taxable (and that obviously would be in the first quarter of the year) the MOST this would cost you is $700 for the entire year, if your rate increases by .1%. Without a UI claim ever, it's likely your rate would not go up at year, or at least very little. Is it really worth paying an employee you don't need instead of paying MAYBE a minimal UI increase?
http://www.edd.ca.gov/pdf_pub_ctr/de2088c.pdf
In other words, your rate would have to increase by more than .3% for your 2011 tax to be more than you're paying him in wages for just one MONTH.
The federal UI rate is a fixed (net) .7% of the first $7K in taxable wages. It does not vary with your experience rating.
Re: UI Claim Effect on Employer's UI Rate
PattyPA,
I really appreciate the feedback. You make some great points. I've heard several anecdotal horror stories, such as state UI rates going up by 1-2% after a single claim, but have no idea if this is true.
The person in question had another job, nearly full-time, until he quit in September 2010. He claims that if I let him go, it would be the perfect situation for him as he could then receive unemployment benefits based on his income from that job as well, even though he voluntarily quit. This may be irrelevant. However, once again, I've heard that the size of his benefit, even if it was not based solely on income from his job with my company, could impact my UI rates.
Thanks again for the help. If you have any further thoughts on this situation that you wish to share, I'd appreciate that.
Re: UI Claim Effect on Employer's UI Rate
You receive a rate notice every year from the state. It tells you what your benefit reserve rate is and how it was calculated. You can use the brochure on the link I provided to do the math.
I wouldn't be as sure as he is that he would qualify for unemployment, at least for the full amount. Sounds like he's trying to scam you AND the system.
Even if your rate went up 2%, that's $140/yr increase per employee, or $1400 for the year. Again, less than his salary for one month.
Re: UI Claim Effect on Employer's UI Rate
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legalaw
The initial claim filing date determines two very important things: the benefit year during which the claimant may file weekly claims, and the base period of the claim
Yes, and?
One more thing I thought of relative to whether he will get UI or not and that is that, if the employer he just quit is in the base period (first four of last five completed calendar quarters when the claim is filed), that employer will get a notice that he has filed as well. And if they had any brains, they'd protest his claim; after all, he quit.
Might make a difference, might not.
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PattyPA
Even if your rate went up 2%, that's $140/yr increase per employee, or $1400 for the year. Again, less than his salary for one month.
Thanks again for sharing your insights, PattyPA. Note though that I'll have to replace this employee with someone else for similar hours/wages, so any rate increase will be an additional expense.
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PattyPA
Yes, and?
One more thing I thought of relative to whether he will get UI or not and that is that, if the employer he just quit is in the base period (first four of last five completed calendar quarters when the claim is filed), that employer will get a notice that he has filed as well. And if they had any brains, they'd protest his claim; after all, he quit.
Might make a difference, might not.
I'm curious about this as well. His former employer was in the base period. He was working about 30 hours a week for 3-4 years with them.
Re: UI Claim Effect on Employer's UI Rate
So, then it isn't really a "lay-off", which implies not being replaced. It's jusr a plain old firing.
That's what unemployment insurance taxes are FOR. Keeping an employee who isn't doing the job just to MAYBE save a small amount of unemployment taxes is not, in the long run, a good business move. If you haven't had ONE chargeable claim in 14 years, it's VERY unlikely your rate will go up at all.
As a friend said, it's like paying $5K out of pocket so your car insurance doesn't go up 50; doesn't make good sense.
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PattyPA
So, then it isn't really a "lay-off", which implies not being replaced. It's jusr a plain old firing.
That's what unemployment insurance taxes are FOR. Keeping an employee who isn't doing the job just to MAYBE save a small amount of unemployment taxes is not, in the long run, a good business move. If you haven't had ONE chargeable claim in 14 years, it's VERY unlikely your rate will go up at all.
As a friend said, it's like paying $5K out of pocket so your car insurance doesn't go up 50; doesn't make good sense.
Hi PattyPA,
I suppose I considered it a layoff because I wouldn't replace him immediately, but for all practical purposes it seems like the same thing.
Just to clarify, he's doing the job, but there are some other issues which mildly disrupt the workplace and relationships with co-workers. So it's a close call whether to keep him on or not, and an increase in UI rates is just one factor in the decision.
As for rates going up, I've heard conflicting reports. Thanks so much for all of your time and help.
Re: UI Claim Effect on Employer's UI Rate
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PattyPA
Yes, and?
One more thing I thought of relative to whether he will get UI or not and that is that, if the employer he just quit is in the base period (first four of last five completed calendar quarters when the claim is filed), that employer will get a notice that he has filed as well. And if they had any brains, they'd protest his claim; after all, he quit.
Might make a difference, might not.
Hi again PattyPA,
Not sure if you'll see this post, but I'll ask anyway.
I was talking with a friend and fellow small business owner today. He's also been lucky enough to avoid UI claims, but had heard (ah yes, more third-hand info) that even if the former employer protests the claim and the employee doesn't appeal, the employee would still be able to collect benefits based on the highest quarter of the last 4 of 5 quarters. This can't be right, can it? Thanks for any thoughts.
Re: UI Claim Effect on Employer's UI Rate
Too many people think that there is an across-the-board response that is determined by who does or does not contest or appeal.
The state makes its determination based on the reason for the termination. It is a myth that if the employer does not contest, the employee will automatically get benefits; I have had employees declined for benefits when I did not contest. If the employee is termed for a reason that disqualifies him for benefits, he will be denied whether the employer contests or not. The reverse is also true.
So yes, if the employer contests, the employee gives up, but the state can see based on the information they have that the employer has not proven their case, the employee can still get benefits.
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cbg
.... So yes, if the employer contests, the employee gives up, but the state can see based on the information they have that the employer has not proven their case, the employee can still get benefits.
Thanks for the feedback, cbg. I think I understand what you're saying. What's still unclear is the responsibility of a prior employer when a current employer lays someone off. Let's say someone works concurrently for Company A and Company B for 5 years. A pays 80% of the person's income, B pays 20%. The person voluntarily quits A. There is no dispute that it was voluntary. Three months after quitting A, the person is layed off from B.
The person files for unemployment and they establish a base period which includes income from both A and B. According to everything I've read on the EDD website, only the last employer (B) is contacted with the Notice of Claim Filed (DE1011CZ), etc. Is this correct? So even though the majority of the income was earned from A, from which the person voluntarily quit, the person will still receive benefits (for the sake of argument, let's assume that the person qualifies for benefits due to being layed off from B) based on the highest quarter in his/her base period, which includes income from A. And is it further correct that A will not even be contacted?
Sorry for the long post. I guess my question could have been summed up like this: Is only the last employer contacted when someone files an unemployment claim, even though a person had multiple employers during a relevant base period? Furthermore, is only the last employer subject to having funds taken from the reserve account to pay for the benefits, and only the last employer subject to having their UI rates increase?
Thank you so much to anyone who made it through this post. Any additional help will be greatly appreciated.
Re: UI Claim Effect on Employer's UI Rate
Employer A could probably request a "relief from charges", which means even if the employee is granted benefits, employer A's reserve account would not be charged.
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PattyPA
Employer A could probably request a "relief from charges", which means even if the employee is granted benefits, employer A's reserve account would not be charged.
Thanks PattyPA. This seems to suggest that A will be contacted in this scenario.
Hope I'm not being tedious here, I'm just trying to understand the process. Also, I realize that there may not be a definitive answer to these questions... as the EDD website states, claims are handled on a case-by-case basis.
Re: UI Claim Effect on Employer's UI Rate
Make no mistake about it; Company A WILL be notified that the employee has filed a claim, if Company A is in the base period, i.e., the employee worked there during any the first four of the last five completed quarters from the date the claim is filed. That means, if the employee files a claim in 4th quarter 2010, Company A will be notified if the employee had earnings in any quarter between 3rd quarter of 2009 and 2nd quarter of 2010.
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PattyPA
Make no mistake about it; Company A WILL be notified that the employee has filed a claim, if Company A is in the base period, i.e., the employee worked there during any the first four of the last five completed quarters from the date the claim is filed. That means, if the employee files a claim in 4th quarter 2010, Company A will be notified if the employee had earnings in any quarter between 3rd quarter of 2009 and 2nd quarter of 2010.
Much appreciated, I appreciate the clarification.
Ok, so what happens if the employee voluntarily quit Company A and there are no extenuating circumstances? To highlight the issue I'm trying to get at, let's say the employee earned $12,000 per quarter in the base period (enough to qualify for max benefits in CA) from Company A and $200 per quarter from Company B.
Subsequent to quitting Company A the employee is layed off from Company B. A claim is filed, Companies A and B respond truthfully. Let's assume that the layoff from Company B qualifies the employee for benefits. What base period income figure is likely to be used to determine the amount of benefits? Will the person be able to collect max benefits, will the earnings from Company A not be counted, or...?
Thanks for sticking with this thread.
Re: UI Claim Effect on Employer's UI Rate
Then Company A can protest the claim. If the employee has worked for Company B long enough, he will probably be granted benefits, and such benefits WILL be based on all wages earned from both employers in the base period. Generally speaking, if the employee earned 75% of his total wages from Company A, then 75% of his benefits will be charged to Company A. However, Company A can request a "relief from charges" which, if granted, means Company A's UI rate will not be otherwise affected.
Honestly, if I can say so again, you're REALLY overthinking this. If your employee is causing problems at work, then you either tell him to knock it off (if you think he's salveageable) or fire him, if you don't. Is is really worth upsetting the whole apple cart because your UI rate MIGHT go up .1 or .2% (and even that is not a sure thing)? This is insurance after all, it's there in case it's needed. One firing, even if TOTALLY charged to your reserve account, over 14 years, is almost certainly NOT going to result in a rate increase.
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PattyPA
Then Company A can protest the claim. If the employee has worked for Company B long enough, he will probably be granted benefits, and such benefits WILL be based on all wages earned from both employers in the base period. Generally speaking, if the employee earned 75% of his total wages from Company A, then 75% of his benefits will be charged to Company A. However, Company A can request a "relief from charges" which, if granted, means Company A's UI rate will not be otherwise affected.
This is exactly what I was trying to understand. Thanks so much for your explanation and patience.
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PattyPA
Honestly, if I can say so again, you're REALLY overthinking this. If your employee is causing problems at work, then you either tell him to knock it off (if you think he's salveageable) or fire him, if you don't. Is is really worth upsetting the whole apple cart because your UI rate MIGHT go up .1 or .2% (and even that is not a sure thing)? This is insurance after all, it's there in case it's needed. One firing, even if TOTALLY charged to your reserve account, over 14 years, is almost certainly NOT going to result in a rate increase.
Totally agree with you. In fact I spoke with him yesterday and his employment will end on Dec. 31st. Didn't mean to go overboard on this, just trying to figure it all out. Plus, I've been talking to various people the last couple of weeks and it's clear that there's a lot of confusion out there-- everyone has "heard" this or that, or had cases go against their understanding of the process.
Thanks again for the help, PattyPA. I've also been reading through the archives and learning a lot. Happy Thanksgiving!
Re: UI Claim Effect on Employer's UI Rate
You're welcome. I used to manage the UI claims process for a company with operations in many states, including California.
Good luck with a new employee.