Executive’s Guide to Unemployment Insurance Claims Process

In 2022, American workers received 24.26 billion dollars in unemployment insurance benefits. Currently, 2023 unemployment benefit payments are on pace to exceed those paid out in 2022. This huge number impacts nearly all American businesses. Business owners and stakeholders need to understand the unemployment insurance claims process, how it is calculated, and ways to control costs related to unemployment insurance.

What is unemployment insurance?

Eligible employees receive a source of income through unemployment insurance while unemployed. States manage unemployment benefits but must follow the federal guidelines established by the U.S. Department of Labor. Taxes, known as Federal Unemployment Tax Act (FUTA) and State Unemployment Tax Act (SUTA) tax, fund these benefits.

How does unemployment insurance impact my business?

Employers fund FUTA by paying the tax to the federal government. The FUTA tax rate is the same for all businesses. The employer contributes 6% of the first $7,000 of an employee’s income for the calendar year. In other words, $420 per employee.

SUTA, however, is a state-based tax rate that varies based on your experience rating in each state where you employ workers. Your experience rating is calculated based on your history of taxable wages and benefits paid out over 48 months. Employers should note that if your company pays into SUTA, you receive a 5.4% discount on your FUTA. Your FUTA tax rate moves to 0.6% or $42 per employee. In some states (specifically Arkansas, New Jersey, and Pennsylvania), employees must contribute a small portion of the state unemployment insurance taxes.

While employers all pay the same FUTA rate, SUTA tax rates may be impacted by your experience rating. To understand the experience rating, you must understand the unemployment insurance claims process.

How does the unemployment claims process start?  

When an employee separates from your business, they may file an unemployment claim with their state unemployment office. Unemployment claims have a base period in which employees may be eligible. The base period is one year consisting of the first four of the last five completed quarters.  You are considered a chargeable employer if the filing employee worked for your business during that base period.  The Unemployment office sends each previous employer a formal claim. At that point, you should determine whether you believe the claim has merit or if you will protest it.

When should I protest a claim?

Employees are eligible for unemployment benefits if they experienced:

  • Laid off
  • Reduction in hours
  • Leave of absence
  • Furlough: Laid-off employees or those let go due to a reduction in work are generally eligible for unemployment benefits.
  • Fired: At first, it may seem fired employees should never qualify for unemployment benefits. However, in some cases, they can still claim benefits. Examples include termination due to cutbacks or minor or unintentional infractions. Employees terminated for willful misconduct typically will not qualify for unemployment benefits.

However, an employee may not be eligible if their separation from the company was a:

  • Termination for just cause (such as a policy violation, fraud, or theft)
  • Result of not showing up for work and not calling in
  • Voluntary resignation: An employee who willfully leaves their position for a new opportunity or because they’re unsatisfied with their job is not typically eligible for unemployment. One who leaves for what’s known as a good cause(including harassment, unsafe work conditions, or serious illness) will likely qualify.

If an employee is clearly eligible for unemployment benefits, you should not protest the claim. If, however, the claim does not have merit, or if it is unclear if an employee’s termination qualifies as just cause, you should protest the claim to protect your experience rating.

Ask yourself the following questions:

  • Was the employee separated through no fault of their own?
  • Do you believe the employee is eligible?
  • Do you have adequate evidence to protest the employee’s right to unemployment benefits?
  • How will your decision impact your experience rating?

An employee whom your organization terminated through no fault of their own is typically eligible for unemployment benefits.

Generally, you should not protest a claim from a laid-off employee. However, when it comes to claims filed by fired employees or those who quit, you’ll have to examine each situation individually. If you decide to protest an unemployment claim, understanding what will happen next is vital.

What happens if I protest an unemployment claim?

If you do not believe the employee qualifies for unemployment benefits, submit the protest reason to the unemployment office. You should include evidence to support your reason. For example, if the separation resulted from a policy violation, submit the policy, the employee’s acknowledgment of the policy, and documentation of discussions with the employee about the policy. The state reviews each claim, and the evidence provided. They will then notify both the employer and the employee of the determination.

When a claim is protested, an adjudicator may call the employer to ask more specific questions before issuing a determination. If the employee is found eligible, but employer does not agree with determination, the employer can appeal that determination.

To appeal a determination, the employer must file supporting documentation within the time frame noted in the determination. Once the appeal is received, the state will schedule a hearing. Employers must submit evidence in advance (24-48 hours in many states) of the hearing to the judge and employee. The hearing is often evidentiary in nature, meaning supporting witnesses may need to be present to testify (often telephonically). After the hearing, the state notifies of its decision. If an employer decides to appeal the decision, that appeal is escalated to the Board of Review. The Board of Review issues the final decision with no further appeal opportunities.

How can I influence my unemployment insurance experience positively by minimizing claims?

Minimizing unemployment claims begins with the hiring decision.

  1. Hire and develop the best talent

One way to avoid unemployment claims from hitting your desk in the first place is only to hire workers that:

  • You absolutely need
  • Are qualified for the position

Employees may qualify for unemployment benefits when terminated because they’re not a good fit for their position, assuming they meet the minimum employment qualifications and provide their best work.

If you find yourself needing to fill a position quickly, remember it’s smarter and often less costly to take your time and hire only the best applicant.

It’s also critical to develop the talent you have. Employee performance depends, in part, on the employer setting clear expectations and then helping the employee understand how to meet those expectations by providing tools, resources and training. If you hire the best talent but don’t develop it by making your expectations clear, you could experience avoidable turnover and unemployment claims.

  1. Provide new hires with an employee handbook

Do you have an employee handbook? An employee handbook promotes several benefits, but most importantly, it informs current and new hires about workplace standards, policies, and disciplinary procedures. Anytime you distribute a handbook to a new employee, remember to have them sign a Handbook Acknowledgment Form. This will serve as documentation that you distributed the handbook and allowed the employee to ask questions. With documented information in a handbook, fired employees can’t claim ignorance of protocol as a defense, which is enough to warrant unemployment benefits in some situations. If you currently operate without a handbook, an employment contract or offer letter can help until you can produce one.

  1. Document promptly and precisely

Document significant events throughout an employee’s time with your company, from employment applications to dismissal, such as:

  • Initial application
  • Signed contract or offer letter
  • Handbook Acknowledgment Form upon hire and after revisions
  • Attendance records
  • Disciplinary measures and performance counseling
  • Injuries on the job
  • Request for a reduction in working hours or a change in job description
  • Resignation letter
  • Any other event or incident related to termination or change of employment status
  1. Follow protocol when protesting a claim

Remember, whether a former employee is eligible for unemployment benefits is not up to you. It’s up to your state’s unemployment office. Look into your state’s process and protocols for disputing unemployment claims to understand your rights and those of the employee.

This includes deadlines for filing paperwork, what constitutes evidence, and whom you can have to speak at a hearing. If you need more clarification about the process, hire professional help. Making a mistake could prove fatal to your case, even if you think you’re right.

As an employer, you always have the option of protesting an employee’s application for unemployment benefits. However, that doesn’t mean it’s the right option in every scenario.


How does PEO partnership help your unemployment insurance claims process?

A professional employer organization (or PEO), like Tandem HR, can help with the unemployment insurance claims process. As your co-employment partner, Tandem HR compiles your protest packet, communicates with the state unemployment offices, and assists with and attends appeal hearings. This partnership frees up your time to focus on revenue-generating activities and the development of current staff.

For more information on partnering with Tandem HR for unemployment and other employment related administration, email marketing@Tandemhr.com or call 630.468.9286 today!