Employers never want to have to terminate an employee, but sometimes it is unavoidable. Whether implementing a reduction in force or a termination for cause, ending the employment relationship is not a decision leaders make lightly. Not only has your company invested in that employee’s compensation and training, leaders often feel emotionally invested in each employee’s welfare. Yet, it is important to keep in mind that terminations are often necessary to protect your business.

It is also important to protect your business from an upsurge in unemployment liability. The Federal Unemployment Tax Act (FUTA) and State Unemployment Tax Act (SUTA) require employers to fund unemployment compensation payments for workers who lose their jobs under certain conditions, as outlined by the Department of Labor in your state. However, the cost to your company is not a flat rate.

To put it simply, the unemployment tax rate your company is required to pay is calculated based in part on the number of former employees who have filed unemployment claims against you. That means if you have a high number of terminations, you will likely have a high unemployment tax rate.

The unemployment system was designed to provide workers who lose their jobs through no fault of their own with insurance protection to minimize the financial burden of job loss. It serves to stabilize our economy by encouraging employers to avoid turnover and keep money flowing in the marketplace. Although unemployment insurance is a protection for us all, it can become a major financial burden for employers without the right guidance and professional support in navigating the system.

A knowledgeable human resources consultant can help you minimize your unemployment liability in the following ways:

Improve your hiring practices by screening and interviewing applicants more effectively and hiring the best-qualified candidates for the job. When you hire a strong team on the front end, you can boost profitability, curtailing the need for layoffs and reducing turnover.

Increase employee retention and job satisfaction by implement top-notch training and development, creating a positive company culture, and giving employees what they need to perform their jobs effectively.

Make strategic decisions about hiring and employment arrangements. If you need seasonal workers, short-term help, or you are operating in an unsteady industry or economy, consider working with a staffing agency to fill certain roles and shoulder the uncertainty while you avoid unemployment liability.

Get a better handle on your unemployment case management by putting proper systems and processes in place. When you are proactive about compliance and reporting, you’re able to stay on top of what you owe and can make adjustments accordingly.

Be aware of hidden liabilities, such as claims by employees who are terminated by their next employer. If they were employed by you previously, you may be charged for a percentage of their unemployment. So, it is your responsibility to respond to each Notice of Base Year Employer form or you may be automatically charged.

Find out if you are eligible to implement a Shared Work Unemployment Compensation program, which would allow you to divide available work among certain employees in lieu of a layoff. This would enable employees to work reduced hours and receive partial unemployment compensation, while you are able to retain valuable employees and reduce your unemployment tax liability.

Provide outplacement assistance. Not only are you promoting goodwill when you assist your former employees in finding gainful employment, you are also reducing your unemployment tax liability. Providing help with resumes, interview skills, and networking support is a minimal cost to you compared to unemployment. It’s also smart to keep the relationship intact and rehire strong employees who are still receiving unemployment payments when an opening becomes available at your company–a win-win for all.

Contest unjustified unemployment claims. When an employee quits or gets fired for cause, it is your responsibility to try to prevent improper claims from being paid. For example, if an employee is fired for misconduct, such as a documented violation of a specific rule, they would not be eligible. Likewise, if an employee quits without a job-related good cause, they may not be eligible for unemployment. If you learn that an ex-employee has turned down a suitable job offer, is self-employed, or is receiving workers’ compensation pay, you will want to contest their claim.

It is also important to defend unemployment claims because allowing them to go unchecked can have a costly impact on your business over time. You are opening yourself up to possible further legal actions, as an employee who loses an unemployment claim is better positioned to file a lawsuit.

Reducing your unemployment liability requires deep knowledge of the system as well as careful planning, training, and documentation. Does your organization need help managing unemployment liability? We can help! Contact us today.