Did you know that claims for unemployment benefits from former employees can increase your State Unemployment Tax Act (SUTA) tax rate?
Managing the unemployment process can sometimes take excessive resources making it difficult for business owners to give unemployment claims the attention they require. Nextep manages this process for our PEO clients and can help companies keep costs down through proper unemployment claims management.
Company owners and leaders should know exactly what unemployment benefits are and what to do when a claim occurs. Some mistakenly think that employment that ends for any reason entitles the former employee to unemployment benefits. In reality, unemployment is meant for people who temporarily or permanently lose their jobs through no fault of their own, such as through a reduction in force or weather-related disaster. Voluntary resignations to work elsewhere are generally not eligible for unemployment benefits.
In terminations for cause, unemployment is usually denied when the employer can prove willful and gross misconduct on the part of the employee. This is where proper documentation becomes highly important.
If you’re managing this, you’ll need the following documentation upon receipt of a claim:
- Termination reason and date.
- Resignation letter if the employee quit.
- Handbook acknowledgment signed by the employee.
- Signed written warnings, performance improvement plans, reviews, and the final incident that led to any terminations for cause.
When investigating unemployment claims, the state often focuses on the final incident. If a company terminates an employee after being tardy 20 times, the state will want to know what about this particular tardy warranted termination when the other 19 were allowed. Progressive discipline and documentation are imperative in fighting these claims and providing proof of a final incident that justified termination.
Handling unemployment claims
If a PEO client receives an unemployment claim, the first step is to call your PEO’s HR specialist immediately for step-by-step guidance. If you’re not with a PEO, refer to your company’s HR specialist.
In handling unemployment claims, Nextep’s HR business partners often see ways a company loss could have been avoided. These tips will help give your company a stronger defense when dealing with claims for unemployment compensation from former employees.
- Document, document, document. If it’s not in writing and signed by the employee, it is difficult to introduce it as evidence in an unemployment hearing. All performance improvement plans, disciplinary notes, and other important information should be communicated and well documented leading up to the termination.
- Give the employee clear direction. The state looks at whether you give the employee chances to succeed, including thorough training and clear direction on performance issues.
- Get signed acknowledgment. Simply documenting an employee’s poor performance without clear communication and signed acknowledgment is not enough. Disciplinary notices, receipt of employee handbooks, and special training should all be accompanied by a signed acknowledgment from the employee with the opportunity for the employee to provide feedback.