Why should a company try to control its unemployment tax rates?

Unemployment taxes are an experience rated payroll tax. A company can have a higher or lower tax rate depending on how many individuals collected unemployment benefits. Blocking unwarranted claims over time lowers or controls your company’s unemployment tax rate. An unwarranted claim collected against a company will affect the employer’s unemployment tax rate for three years!

How much does one unemployment claim cost a company?

The average claim will cost the employer between $4,000 – $14,000 in unemployment taxes or contribution rate. The cost of a claim varies depending on how many weeks a claimant collects, the weekly benefit amount the claimant is eligible to receive, the current tax rate, etc. For most employer’s unemployment is not paid dollar for dollar.

Based on information from IDES is 2013, in Illinois the average cost to the employer of a claim is $10,524.21. Here is the breakdown:

  • The average weekly benefit amount collected in Illinois : $321.45.
  • The average duration of unemployment benefits in weeks: 17.92. 
  • The average amount of unemployment collected for claimants is $5760.38.
  • The average multiplier in Illinois for employer taxes is 1.827.
  • The Math: $5760.38 * 1.827 = $10,524.21 

Is it possible for one claim to cost an employer $25,466.40?

Yes. The following example is based on Illinois numbers.

John Doe had been making about $50,000 a year and has been fired. The employer (Company A) mistakenly does not contest the claim. John Doe is entitled to the 2013 maximum weekly benefit amount of $413 per week. He may not have intended to collect for the full 26 weeks, but he ended up doing so nonetheless. Company A, as the chargeable employer, was charged with the full $10,738 to its benefit charge account.

Company A employs 10 workers. In Illinois, based on 2013 information, the first $12,960 of wages paid to a workable are taxable, and used to calculate the unemployment tax rate. In this case, Company A has $129,600 of taxable wages per year. Company A however has been growing, adding two employees each year for the past three years. To calculate the Benefit Ratio, which is the controllable factor of an Company A’s UI contribution rate, we take Company A’s Benefit Charges for the previous 3 years ($10,738 resulting from one claim), multiply by 1.384 (the Benefit Conversion Factor), and then divide by the Taxable Wages for the previous 3 years ($12,960 x 10 +$12,960 x 8 + $12,960 x 6 = $311,040), and then rounded to four places past the decimal when expressed as a percentage:

Benefit Ratio = $10,738 x 1.384 / $311,040 = 0.04777968107 = 4.7780% (after rounding)

We then multiply the Benefit Ratio by the State Experience Factor of 1.25 and round to the nearest one-tenth of one percent:

4.7780% * 1.25 = 5.9725% = 6.0% (after rounding)

Finally, we add the Fund Building Rate of 0.550% to arrive at Company A’s Unemployment Insurance Contribution Rate:

6.0% + 0.550% = 6.55%

Company A then has to then pay 6.55% of $12,960 = $848.88 in unemployment payroll taxes for each of their employees in the first year after John Doe has left. That means $8488.8 for the first year alone!

Furthermore, the $10,738 that John Doe collected, remain in the Benefit Ratio calculation for 3 years! For simplicity, if we assume no growth or decline over the next few year for Company A, then over the span of 3 years Company A will pay $25,466.40 in unemployment taxes.

Don’t claimants just get awarded benefits no matter what?

No. All claims filed for unemployment benefits get adjudicated by the state agencies.  Claimants will be awarded benefits if they are laid off or they lose their jobs through no fault of their own. If a claimant is fired for misconduct or quits for personal reasons, the claimant may be denied unemployment benefits if the claim is contested properly.

What should I do to protect my business against unwarranted claims?

An employer should protest contestable claims in a timely and adequate manner, appeal decisions that award benefits to administrative hearings, attend hearings, audit quarterly charge statements and monitor its tax rate. Employers should also be sure to use the misconduct standard in its terminations and it should document all disciplinary actions and quits. Personnel Planners specializes in the consultation and execution of this process so that employers can spend their time and valuable resources on their staff and current business needs.

Why outsource unemployment matters and use Personnel Planners?

Personnel Planners is a national provider of unemployment cost control services with clients in all 50 states. We specialize in cutting unemployment taxes through a variety of services including annual supervisor training, pre-termination consulting, claims administration, hearing preparation, hearing representation, ruling appeals, charge auditing, record maintenance, online reporting and more.

As our client you will save on taxes, time, stress and valuable resources all while staying compliant with federal and state laws thanks to our integration with the State Information Data Exchange System (SIDES) and to our great staff. We appropriately handle EVERY claim that comes into our office in a timely fashion. At Personnel Planners all claims analysts and hearing representatives are well trained ABA approved certificated paralegals with years of experience. We focus on providing a personal service to our clients. Our claims writing staff raise proper sections of the unemployment handbooks when contesting the claims and do a full review of the employer documents prior to submitting a protest letter. Our clients also get the benefit of knowledgeable hearing representatives who know what questions the hearing judges are likely to ask.

Additionally we provide a client portal for all of our clients to access complete reports of the status of their unemployment claim in real time. The portal is also a way to share and exchange information regarding the claims. Personnel Planners is committed to providing our clients with substantial savings and excellent service. We care about our clients and their cases. We’ve been in business since 1981 and we pride ourselves on our client retention rate. Whenever an opportunity to better our work presents itself, we never hesitative to improve our service. We help our clients make a good termination in light of the unemployment system so that they will not be as vulnerable to unwarranted unemployment claims and the increased payroll taxes that come with them. We return phone calls and emails promptly and don’t let claims slip through the cracks.  When using our service all your claim responses will be submitted on time.

Who pays for unemployment insurance benefits?

Employers pay 100% of all benefits paid to claimants.

When is an employee eligible for unemployment benefits?

An employee can be eligible for benefits when they meet the state agencies monetary eligibility requirements and when they have lost their job through no fault of their own. Generally, employees who quit, or are discharged due to misconduct, should not receive unemployment benefits. There are also a number of other disqualifications that will result in the employee being ineligible for benefits.

What is Section 252 of the Trade Adjustment Assistance Extension Act of 2011?

The Act states that businesses must file a response to an unemployment claim in an adequate and timely manner whether or not the business is choosing to contest the unemployment claim. A pattern of failure to respond to claims has a consequence.  Charges that in the past would have been dropped from an employer’s U.I. account after a decision was reversed in the employers favor will now be unable to be dropped. The Act states that state agencies must now prohibit relief of charges when:

  • UI benefits were improperly paid because the employer, or their agent, was at fault for failing to respond in a timely or adequate manner to the agency’s request for information (RFI) relating to the unemployment claim,  AND
  • The employer or agent has established a pattern of failing to respond to such requests in a timely or adequate manner


Many states have defined a pattern of failure as the greater of two or more instances or two percent or more of claims within the prior year. Businesses who show a pattern of non-compliance in responding timely and adequately to their U.I. claims may lose the ability to have charges on these claims removed from their account should a decision to award benefits later be reversed. If the charges are not dropped and remain in the employer’s U.I. experience rating, that company may pay thousands more in future U.I. taxes.

What a “Pattern of Failure” is as mentioned in Section 252 of the trade Adjustment Assistance Extension Act of 2011?

Not all states have defined a pattern of Failure. Below is a chart of the states that have defined a pattern of failure. A pattern of failure can lead to loss of appeal rights, penalties, and being charged for claims even when the claimant has been denied benefits.

AK Greater of 2 instances of 2% of claims within prior year
AL 2 or more instances
AR Greater of 5 instances of 5% or total claim within prior year
CA 2 or more instances related to individuals claim 
ID 2 or more instances
KS Greater of 2 instances or 2% of total claims within prior year
KY Greater of 6 instance or 2% of total claims within a calendar year
ME Greater of 2 instances of 2% of total claims within prior year
MI Greater of 4 instance or 2% of total claims  within prior calendar year
MN Greater of 2 instances of 2% of total claims within prior 6 months
MO Greater of 2 instances of 2% of total claim within prior year
NJ Greater of 3 instances of 2% of total claims within prior year
NC 2% or more of total claims with prior year
OH 4 or more instances
SC 3 or more instances within a calendar year
TX 2 or more instances
VA 3 or more instances
WA Greater of 3 instances within prior two years or 20% of total current claims
WI 5% or more of cases appeled to tribunal
WY Greater of 2instances or 2% of total claims within prior year

Are there penalties for not responding to unemployment claims or provided false statement in a response to an unemployment claim?

Yes. Not all states have penalties in place however all states have the ability to implement penalties  due to Section 252 of the Trade Adjustment Assistance Extension Act of 2011. Please review the chart below for the states who have put into place penalties thus far.

California False statement can lead to penalties up to 10X the weekly benefit amount.
Louisiana False Statements can lead to penalties of $50-$1000.
Massachusetts A $25 penalty per instance of unresponded unemployment claim and loss or appeal rights.
Maryland A $15 penalty per instance on unresponded unemployment claim.
Minnesota Employer must pay the trust fund the amount of the overpaid unemployment benefits. Additional false statement will lead to a penalty of $500.
Nebraska False statements and unresponded claims will lead to loss of appeal rights on all rulings.
New York False statements and unresponded claims will lead to employers being considered a non-interested party.
Virginia Unresponded claims will lead to a $75 penalty after third offense.
Vermont Unresponded claims will lead to a $100 penalty per unresponded claim.
Wisconsin Unresponded claims will lead to revocation of right to agent representative

What is the State Information Data Exchange System (SIDES)?

SIDES is a web based system that allows electronic transmission of information requests from UI agencies to employers and/or Third Party Administrators. SIDES, backed by the US Department of Labor (USDOL) is the new way to receive and respond to unemployment claims. SIDES will become mandatory in some states.  For instance, Illinois has implemented SIDES and in the near future, will require the use of SIDES for all businesses with more than 50 employees. This will also put greater scrutiny on response rates.

SIDES is meant to facilitate what the (USDOL) calls U.I. integrity. The agency wants to reduce fraud and abuse by accurately adjudicating claims with good information exchanged through a third party central broker, eliminating transmission disputes. Since the claims are received immediately rather than with a snail mail delay, SIDES also has the benefit of giving employers more time to respond to claims.

There are two ways employers can utilize SIDES:

  • E-Response (which Illinois had erroneously called E-SIDES upon implementation) is available online for free. Responding to an unemployment claim on E-Response is a multi-step process that requires the employer to always enter their State, Federal Employer Identification Number (FEIN), State Employer Identification Number and their Identification Number/Access Code each time they want to enter the website. Once on the website, to respond to an unemployment claim the business must go through 9 full screens of questions to reply to the request for information. If a business has a question on how to use the online program the employer can read a 60 page manual on how to respond: https://info.uisides.org/pubdocs/E-ResponseSepInfoScreenShots.pdf. E-response does allow users to keep copies of correspondence for 90 days, however it does not allow for unemployment management in that it does not keep track of submitted documents, received documents, determinations, claim statuses, and other related information. The SIDES team recommends that only small employers use E-Response.
  • SIDES (Also known as SIDES Web-Services) is a computer to computer interface. SIDES allows employers to customize their information systems to interface with SIDES. This option requires the employer/TPA to do programming. Personnel Planners’ Claims Management System was rebuilt from scratch around the SIDES interface, and boasts a wide variety of other modern solutions.

What do I need to start working with Personnel Planners?

You can begin by filling out the Power of Attorney form which is located: https://personnelplanners.com/map/  This form is the first step in allowing Personnel Planners to step into the process of handling all of your claims.

Upon clicking the link, please click the appropriate state, fill out the form located on the right and send it to us at info@personnelplanners.com.  Personnel Planners will then reach out to you to complete any paperwork, answer questions, and get you all set up! From here, we can then schedule any necessary training and get working on your claims right away.



True or False?