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  1. #1
    Join Date
    Nov 2010
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    18

    Default 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.

  2. #2
    Join Date
    Dec 2007
    Posts
    2,357

    Default 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.

  3. #3
    Join Date
    Nov 2010
    Posts
    18

    Default 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.

  4. #4
    Join Date
    Dec 2007
    Posts
    2,357

    Default 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.

  5. #5
    Join Date
    Dec 2007
    Posts
    2,357

    Default Re: UI Claim Effect on Employer's UI Rate

    Quote Quoting legalaw
    View Post
    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.

  6. #6
    Join Date
    Nov 2010
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    18

    Default Re: UI Claim Effect on Employer's UI Rate

    Quote Quoting PattyPA
    View Post
    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.

    Quote Quoting PattyPA
    View Post
    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.

  7. #7
    Join Date
    Dec 2007
    Posts
    2,357

    Default 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.

  8. #8
    Join Date
    Nov 2010
    Posts
    18

    Default Re: UI Claim Effect on Employer's UI Rate

    Quote Quoting PattyPA
    View Post
    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.

  9. #9
    Join Date
    Nov 2010
    Posts
    18

    Default Re: UI Claim Effect on Employer's UI Rate

    Quote Quoting PattyPA
    View Post
    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.

  10. #10
    Join Date
    Jun 2006
    Location
    Massachusetts
    Posts
    24,521

    Default 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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