The Hidden Cost of Firing
Every terminated employee who files a claim for unemployment insurance causes your unemployment-insurance rate to rise. That's acceptable if the claim is appropriate. But all too often, it's not.
Charlie Christopher, owner of Christopher's, a restaurant in Cambridge, Mass., recalls the worker who walked out one day, never to return. Another admitted to stealing $6,000. Both filed claims to collect unemployment insurance. "It's not fair to the system or to me," complains Christopher.
The system is often abused. The Department of Labor reports that states overpaid claimants $1.3 billion in 1990. That means employers were charged too much. And those overpayments translate into higher taxes.
The worst offenders: Alabama, Arizona, Indiana, and New Jersey, which overpaid 16% to 19.3% of the dollars they doled out. Employers aren't responsible for most of these errors. (See chart, No. 05921461, May 1992.) Your best defense against being overcharged is eternal vigilance over your local unemployment-tax office and, to the extent possible, over terminated employees. Call your local unemployment-tax office to request details on claims made and the calculation of your tax rate. When employees depart, tell them if they are eligible for insurance and give them a copy of their attendance record.
You might consider hiring a company, as Christopher did, that will monitor and audit unemployment claims and tax rates. The Association of Unemployment Tax Organizations (614-224-7221) will send you a list of its members.
-- Ellyn E. Spragins* * *