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A short definition from Google defines unemployment insurance as “insurance that provides benefits to workers who meet eligibility criteria and have lost their jobs.”  We are going to break this down and explain what it really means to an employer.

wqrrtLet’s start with taxes.  If you are a business owner, you probably know all about the unemployment taxes you pay.  If not, you should know that there are federal and state taxes you are required to pay for unemployment, in most cases.  Each state’s unemployment arrangement bases your tax rate on the amount of benefits paid to past employees.  The taxes you pay are intended to pay benefits for workers who are qualified to collect them.  This means that if someone who is not at fault (layoff, not a good fit, etc.) is fired, the taxes you pay will go towards them collecting unemployment for a reasonable amount of time.  You pay these taxes on every employee, no matter the length of time they have worked for you.  Employees get wrongfully fired all the time, so if it is time to call it quits with a worker, make sure you are doing it for the right reasons because your taxes may go up.

op[iuNext, let’s talk about why and how a former employee can be denied or granted unemployment.  If a worker quits voluntarily, it is doubtful they will receive benefits.  Now if it had something to do with the business, i.e. harassment, negligent payment, etcetera, then they will start an investigation as to what the scenario really was.  You will be contacted and interviewed, as well as the employee, until they reach a conclusion.  In a different situation, if the employee was not ideal, i.e. regularly late, insubordinate, and so on, you will still be contacted, but it is more certain that this employee would not be selected to receive benefits.  As the head of a company, you want to be sure that you are not setting yourself up for failure in this aspect.  If employees have complaints that you can fix, do your best to fix them because it could backfire if you don’t assess the situation.

ewtgFinally, we’ll discuss price of unemployment insurance.  You can expect to pay 0.6% of the first $7,000 of each employee’s wages each year.  This is just federal government charges.  State unemployment taxes are different in each state, just like sales tax or income tax.  Although, in most states, the tax rate stays the same unless a government mandated increase occurs.  The more employees you lay off or let go, the more you will pay.  This is something to consider when you are in the hiring process.  Ask yourself if you are just giving this candidate a chance or if they truly seem like a possible long-term employee.

There are many ins and outs of unemployment insurance, but the water is navigable.  Make sure you are prepared for what the costs are going to be and plan ahead.  If you have an accountant, they will be able to further assist you with projected costs.  Be mindful when releasing an employee from your business and also be well-prepared for when you get the unavoidable call from unemployment.