calulatorWhen a business receives an unemployment claim, the company will typically look at the potential liability of the claim to determine the potential cost of claim. Although it is important to look at the potential liability of a claim, it is often a misleading metric because it can underestimate the true cost of a claim. The reason for this is simple: for every dollar charged to your unemployment tax account, you will likely pay more in unemployment taxes. The True Claim Cost Multiplier can help quantify this and project how much you will pay in unemployment taxes for every dollar charged against your SUI account.

True Claim Cost Multiplier = Unemployment Tax Costs/Benefit Charges

Here’s a simple explanation about how a lost claim in California could cost a company almost twice as much as the potential liability associated with the claim due to the unemployment tax multiplier:

Sample Employer

2016 Tax Contributions = $960,000.00         2016 Benefit Charged to Tax Account: $533,333.33

960,000/533,333.33=1.8 TCC Multiplier

The True Claim Cost Multiplier varies from state to state, as well as from employer to employer.  The economy will affect the multiplier as well. In a bad economy, the multiplier can be as high as 4X! However, there are times when a lost claim won’t affect your rate because of where your rate falls on the unemployment rate schedule.

We recommend estimating the True Claims Cost Multiplier for each state a business operates in so when you receive an unemployment claim, you understand the true unemployment tax liability of that claim.

Want help to figure your True Claims Cost Multiplier?  Clients should contact their CCC Account Executive.  Future client? Contact CCC at (800) 407-6926 or info@corporatecostcontrol.com.

 

Contact CCC to see how we can save your organization time and money. Contact our Sales Team (800) 207-6926

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