The 2020 numbers are here, and they are startling! According to the Small Business Administration (SBA), 99.7% of America’s firms are small businesses with less than 500 employees. They have 56.8 million employees. Communities across the nation rely on these small businesses for jobs, goods, services and general economic well-being.

Small companies can offer both their employees and customers many advantages over a large organization, but they are still competing with them on the same business playing field. Keeping operating costs down allows small businesses to remain competitive. This is very evident in the Unemployment Compensation venue.

All states have experience-based rating systems for Unemployment Compensation tax rates. They are proportional to the size of the organization. A large organization can have multiple UC claims charged to their account with relatively little impact. A small organization does not have that same luxury. A maximum claim or two against a smaller employer can devastate their tax rate for 3-5 years, depending on the particular state rate calculation formula.

If your UC rate is 2-3 times higher than your competition, that is another factor that adversely affects your ability to compete in the marketplace.

What should you do? A few important suggestions:

1. Do not use your UC account as an “enhanced severance package” for employees that you are separating. Ultimately, it would be cheaper to pay some sort of severance (if that is your goal) than to have it charged to your UC account where you will have increased costs on ALL your employees for several years.
2. Be proactive on your Unemployment issues. Clearly, filings for lack of work and reduced workweek situations are the people that the law was intended to provide for under the UC legislation. However, voluntary quits and discharges should be closely scrutinized by an Unemployment Advisor and pursued as contestable claims when appropriate.
3. Document. Document. Document. If it is not written down, it did not happen.
4. Use UC appropriate verbiage when responding to claims. You can terminate properly per your company policy and still lose a claim due to improper terminology describing the situation.
5. Be sure to answer all State Agency inquiries in a timely manner. You can have the most thoroughly documented, airtight case, but if you don’t respond timely, you lose.
6. Participate in all scheduled UC Appeal Hearings with appropriate witnesses who have first-hand testimony regarding the final incident that caused the separation.
7. Review and update your Company Handbook yearly or if any significant labor law is enacted. Make sure your supervisors are thoroughly familiar with the contents and use it as a basis for any disciplinary actions given to employees.

Following these guidelines will allow your organization to minimize your Unemployment Compensation costs while allowing your employees and customers to continue to enjoy the advantages of working with a small company.


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

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