Friday, May 05, 2006

Will My Unemployment Rates Go Up If I Lay Off this Employee?

Employers frequently ask this question . The answer is it depends on whether and to what an extent an employer is "charged" for the benefits paid to the employee. As explained on the notice sent to employers when a claimant is first approved for benefits:

  • When an individual files a new claim for Unemployment Insurance benefits, a base period is established. The claimant's base period is the first four of the last five completed calendar quarters prior to the effective date of the claim.

  • The total combined wages reported by you and all other employers during the base period determine the claimant's weekly benefit amount, maximum benefit amount, and the percent of benefits charged to each employer who reported base period wages.

The percent of benefits charged is calculated as follows:

  • If the claimant had more than one base period employer, benefits are chargeable to each base period employer in the same proportion as the amount of wages paid to the claimant by each such employer is to the total amount of wages received by the claimant during the base period, and is rounded off to the nearest whole number without the decimals.

Hence, it is quite possible that if you terminate an employee shortly after he or she is hired, you either will not be charged or charged very little because the claimant earned most of his or money from another employer during the base period (first four of the last five completed calendar quarters).

Assuming you are charged, it will affect your "experience rating." How is your experience rate computed?

  • Your experience rate is assigned on a calendar year basis (January to December). It is determined by finding the ratio between the benefits charged to your account and the taxable wages that you reported in the three fiscal years prior to the computation date (July 1 prior to rated year).
    * * *
    The benefit ratio converts to a rate according to the Table of Rates in the Unemployment Insurance Law.

    The Table of Rates can be found in this helpful manual.

No comments: