News
Events
Articles
Press Releases
Success Stories

New Unemployment Tax Rates for 2011:

How Can We Control Costs

 

May 4, 2011 | By Keith A. Sermersheim

On Jan. 1, 2011, the new unemployment insurance (UI) tax rates took effect. These new rates will result in significantly higher UI taxes for many employers. During 2010, employers paid between 1.1 and 5.6 percent tax on the first $7,000 earned by each employee for a maximum assessment of $392 per year. Pursuant to the new unemployment insurance law signed by Gov. Mitch Daniels on Feb. 24, 2011, the new rates (after application of a newly imposed 13 percent surcharge) now range from 0.565 percent to 8.362 percent of the first $9,500 earned by each employee for a maximum assessment of $794.39 per year. Employers at the highest UI rate will pay more than double in UI taxes this year.

Keith A. Sermersheim        812-422-9444        kas@rfpj.com

An employer’s UI tax rate is determined based on a combination of the solvency of the UI trust fund and the individual employer’s account status. An increase in benefit claims will generally increase the tax rate applied to employers. Accordingly, the most effective way to control the amount you pay in UI taxes is to aggressively challenge unwarranted benefit claims by former employees. 

Most ex-employees sign up for UI benefits soon after termination. However, employees who voluntarily quit without good cause in connection with the work, or who are terminated for “just cause” as defined in the statute are not entitled to UI benefits. When you receive a Separating/Base Period Employer Notice and you feel the ex-employee is not entitled to UI benefits, you should respond immediately on UI form 501, and /or contact your attorney for assistance. You should keep excellent employee personnel records including dates of hire and termination, reasons for termination, any warnings or write ups, attendance details, written policies and other records necessary to support your challenge to the UI benefit claim.

In addition to challenging unwarranted benefit claims, employers can help control UI taxes by closely reviewing each month’s Statement of Benefit Charges, and promptly reporting any errors or suspected fraudulent activity by an ex-employee (i.e. unreported earnings or self-employment by the ex-employee). Finally, be sure to file all quarterly unemployment tax returns and pay your taxes timely.  Late payment of taxes or filing of reports can increase your rates from “merit rates” to “penalty rates.”

This article is an updated version of the article published in the May 2011 edition of the Evansville Business Journal, and written by Keith A. Sermersheim, a partner with Rudolph, Fine, Porter & Johnson, LLP in Evansville, Indiana. For additional information, you may contact Keith at (812) 422-9444 (e-mail: kas@rfpj.com). His practice areas include employment and discrimination law, corporate law and business law.

This article is intended solely as an information source and its contents should not be construed as legal advice. Readers should not act upon the information presented without professional counsel.