Laying off or terminating employees can be a necessity, but before you do learn these facts.
Even though you, as the employer, don't directly write unemployment checks to your former employee(s), paying attention to and managing unemployment claims against your company is a wise move.
Here are some facts you may not know:
1. Indirect Unemployment Taxes Can Be Costly
Even though you don't pay unemployment directly, you do pay indirectly by paying unemployment insurance (UI) taxes to the state and/or federal government. It is a joint federal/state program run by the states, taxing business for the benefit of labor.
If many claims for unemployment are made against your company, those UI taxes will increase. The risk of this happening increases when you employ a large staff and/or your company experiences high turnover. Minimizing your liability and managing your claims will go a long way to saving your company money.
Legitimate unemployment claims, such as those caused by a layoff or something attributable to your company, can't be disputed, but others can.
- Keep good records on employee performance
- Distribute an up-to-date employee handbook so that company expectations are clear
- Verify that each unemployment claim is legitimate
- Dispute questionable claims (i.e. a former employee who quit because of personal issues)
2. State Programs, Such as Work Sharing, Offer a Good
Not all states have implemented this program (currently 18 states have enacted laws, with more to come), but it is a great solution for businesses who want to avoid layoffs, don't want to lose skilled workers, and see an economic recovery in the near future.
The Way It Works: Everyone's hours across a company, a division or a unit are cut by the same percentage. So, for example, let's say a department's hours are cut by 20 percent and the average salary in that department is $700 per week.
- If the whole group were laid off, they would receive approximately $320 per week from unemployment, and your UI rate would increase
- With Work Sharing, they would earn $560 in wages per week for hours worked, plus be eligible to collect another $70 per week in unemployment (approximately 50 percent of their wages lost)
Employees remain employed (although part-time), get wages for hours worked, plus collect some unemployment for those cut hours. The biggest benefit to you, the employer, is that you are able to retain your workforce and avoid massive rehire costs down the line.
It's a compromise that works in the short term, mostly because benefits are not cut. In the long term, it's more expensive than laying off staff completely, and you run the risk of skilled employees eventually leaving to find full-time jobs.