It’s easy to regard unemployment taxes, whether federal or state, as fixed costs. But you may be able to control these costs and other claims-related expenses more than you might think. Let’s explore some practical strategies for doing just that.
Double down on retention
Employers are commonly urged to strengthen employee retention. And for good reason: Unemployment tax payments — particularly at the state level — are partially based on the number of employees who file unemployment claims. So, lowering avoidable turnover may help reduce claims activity. Take a continuous-improvement approach, which may include:
- Refining your hiring process to find optimal candidates for your organization and its culture,
- Adjusting compensation and benefits to enable employees to meet their financial needs and maintain their wellness, and
- Training employees thoroughly and supporting their career growth.
That last point is especially important. Generally, workers qualify for unemployment benefits only if they lost their jobs through no fault of their own. But in some cases, even when an employer argues that an employee was fired for poor performance, the worker may win an unemployment claim if the hearing officer finds that the organization didn’t provide enough training or provided the wrong kind of training.
Be careful about terminations and layoffs
Of course, you may encounter situations where you must terminate an employee. In such cases, consider whether severance and outplacement benefits could help mitigate unemployment costs. Depending on state law, severance may affect the timing or amount of unemployment benefits in your favor. And outplacement services that assist claimants in finding new jobs can sometimes shorten the duration of unemployment benefits.
Approach layoffs with caution. These can be particularly onerous from an unemployment cost perspective because, as mentioned, payments are partly based on the number of employee claims. Layoffs carry other risks as well. For example, recent research from Careerminds, a global workforce solutions provider, found that it took employers an average of 7.2 months to fully recover workplace culture following a layoff.
If your organization’s staffing needs fluctuate, look into engaging a temporary staffing agency to meet short-term labor needs. Doing so may help you avoid the time and cost of hiring employees only to later lay them off when business slows.
