CollaborateRunning an effective unemployment cost management program can be a challenge because it requires collaboration between your Human Resources and Payroll Departments. HR tends to handle the claims and hearings components while payroll manages the unemployment tax rates functions. An employer’s unemployment tax rate is primarily dictated by their unemployment claims experience. Therefore, how HR handles unemployment claims will ultimately determine your unemployment tax rates. Unfortunately, many organizations do not fully comprehend how the unemployment system works and how their rates are determined. Oftentimes HR doesn’t understand how lost and mishandled claims are affecting their unemployment tax rates and payroll doesn’t understand why claims would be lost and mishandled. It is important for both HR and payroll to understand the aspects of the unemployment process that they do not handle.

What HR Should Know About Unemployment Taxes

The amount of unemployment benefits your former employees collect when you are the chargeable employer significantly affects your unemployment tax rates (NOTE: Please see CCC website for additional information about who is considered the chargeable employer). If the claimant loses their job through ‘no fault of their own,’ the claimant is eligible for benefits and the claims shouldn’t be contested. However, HR should protest any unemployment claim where the claimant displayed ‘deliberate, willful misconduct’ which makes them ineligible for unemployment benefits per the unemployment legislation. Failing to protest and losing these claims will raise your unemployment tax rates and operating expenses. Furthermore, benefits charges can affect your unemployment tax rates for years so it is critical that all claims be handled with diligence and care. HR should work with payroll to estimate the cost of a lost claim.

 

What Payroll Should Know About the Unemployment Claims and Hearings Process

Payroll can use tactics such as voluntary contributions, joint accounts, etc. to reduce their unemployment tax rates. However, your unemployment claims experience is the primary driver of your rates. Payroll does not need to be involved in the claims process but should generally understand how the claims and hearings process works and the various challenges HR can face during the process. Payroll should monitor their company’s unemployment win, compliance, and protest percentages to ensure HR is managing their claims effectively. Protest percentages can vary a lot by industry so it’s hard to provide a general guideline here. However, your claims win rate (Claims Successfully Protested/Claims Protested) should be at least 90%. Your compliance percentage (Claims Submitted Timely with All Relevant Documentation/Total Claims) should be at least 98%. If HR is not reaching these benchmarks, your UI claims program has room for improvement.

 

How to Foster HR/Payroll Collaboration

Joint webinars with your HR and payroll team members to review how the unemployment system works and how your company handles your claims, hearings, and taxes would be a great way to start. In addition, a quarterly meeting to review your UI program’s process is helpful as it should ensure your program is continuously improving. If you’re working with an unemployment vendor, you can ask them to help lead this change.

 


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