Unemployment costs are beginning to come down from all time highs over the last 6 or 7 years, but they are still one of the most expensive employer costs. Why then, do most employers take for granted that their tax rates and the charges to their Unemployment Insurance (UI) reserve accounts are correct? Honestly, it is because most employers do not know that many of these charges (and therefore, their UI tax rate) are incorrect.
Currently, depending on the state in which you are doing business, between 6 and 14 percent of all charges to your UI account are incorrect – with most of those mistakes being overcharges. These errors lead to higher UI tax rates (or for reimbursable employers – higher direct costs) that are calculated in error. With this kind of error rate, should you simply trust that no mistake was made to your account?
How does one catch these errors and correct them? The answer is actually simple – audit the charges to your account for errors and then protest the errors to your State UI Agency. What do I mean by “audit”? The following are some critical audit area, but first – if you are not tracking your claims, protests, and charges already – you are missing the boat and auditing will be much more difficult.
- Unemployment Protests – be certain that once you protest a claim, that you actually get back a determination on that protest – sometimes these will sit unresolved forever unless you follow up with the agency. I tend to follow up on unresolved protests every 6 weeks.
- Ensure that, once you get a decision in your favor on a protest, that you actually get the credits for any charges assessed to your UI account from that claim. Often, the restitution (the credits you should receive from a determination) get missed and never are applied to your account.
- Audit your charge statements for the following: unreported earnings (if the claimant still worked for you at less than full time), full time employed employees collecting benefits, employees trying to collect benefits while out sick/on vacation/etc., credits that don’t match the original charge, or any other overcharge to your account.
These are just a few key areas for auditing that can have a significant impact on your UI costs. Be sure to consult with a UI expert to ensure you don’t miss the other areas that you should be auditing.
Michael McPherson is a partner at Unemployment Tracker, a software and service company dedicated to providing unemployment cost management software solutions to organizations of all sizes and types. He can be reached at firstname.lastname@example.org.
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