Understanding State Unemployment Insurance (SUI)

State unemployment insurance (SUI) provides a safety net for workers who are laid off or terminated from their jobs without cause. Unemployment benefits help support people while they search for their next opportunity. Workers who quit their jobs or who are fired for performance-related issues are usually not eligible for SUI.

Employers primarily fund SUI through contributions for each eligible employee. SUI rates vary by state and other factors. Are you taking the necessary steps to optimize your contributions?

Managing variable contribution rates

Each state determines its unemployment insurance rates. Your company's contribution is also affected by the number of former employees with open unemployment insurance claims. The more claims filed, the higher your rate. Promptly responding to claims when they're filed — particularly those by former employees not eligible for unemployment benefits — is key to keeping your rates as low as possible. By proactively managing your SUI contributions and responses, it's possible to save hundreds of dollars per employee. Use an SUI calculator to help establish a baseline for your unemployment insurance rate.

Responding to a SUI claim

It's essential that employers respond to unemployment claims promptly. Failure to respond can have serious consequences, including penalties and fines. Missing deadlines can also leave you unable to effectively contest an invalid claim. In some states, a firm can lose its rights to receive notifications, a right to an appeal or a hearing.

How your business responds to unemployment insurance claims can have an important impact on your SUI rate. Typically, when a former employee makes a claim, the state will request more information from any businesses that employed the individual in the last 15 months (roughly five quarters). Employers can respond by validating the claim or contesting it. Based on the information provided, the state will make a determination. The employee or employer can appeal the decision.

Throughout the appeal process, it's critical that a business has information relative to the claimant's employment, including:

• Basic information, including dates of hire and termination;
• Details on the employee left: i.e., laid off, fired with cause, or voluntary resignation; and
• Documentation to back up the cause for separation, such as a resignation letter.

How does the SUI appeals process work?

The state unemployment agency determines whether a claim is approved or denied. If it's approved, the agency notifies protesting employers, which receive a statutory period in which to file an appeal. This involves filling out the appropriate form and providing supporting documentation for their case, such as resignation letters, exit interviews, disciplinary notices, and employee handbooks. After reviewing the appeal, the state agency makes a determination.

Employers at that time can request a hearing. Both parties usually appear in person or by telephone. In most states, employers have the opportunity to present their narrative, show supporting documentation, and produce and interview witnesses who can support their response. For example, a company supervisor might testify about firing an employee for misconduct. A human resources manager might speak about her oversight of the process and the exit interview she conducted with the aggrieved employee. Depending on the state, hearings may be attended by a representative from the company, a knowledgeable SUI hearing specialist, or an attorney. A state may require multiple levels of appeal before a final decision.

Be prepared to handle SUI claims

It's important that companies develop a strategy to manage SUI contributions and respond to claims. Effectively addressing unqualified demands for unemployment insurance can keep rates as low as possible. This requires a three-part approach:

• Understand your company's obligations under state guidelines, current unemployment insurance levels for former employees, and upcoming changes to regulations;
• Maintain documentation as required by law; and
• Maintain expertise to respond to claims and appeals when required.

Some companies handle these functions in-house, but busy HR departments don't always have the bandwidth to juggle an effective SUI program and responses to claims. Complicated cases may also require expensive legal expertise. Therefore, your business may want to consider using a SUI service. Contracting with an expert ensures that you stay in compliance with state regulations, and have a program in place to evaluate and respond to claims when they arise.