State Unemployment Rates and The Impact Of COVID

Preparing today for tomorrow’s impact

 Now that we have endured the significant period of termination and layoffs associated with the COVID pandemic, leading to record unemployment claims, we are left making assumptions on how the Government will assess the annual unemployment rate for the following year.

Unemployment Tax Rates have typically been dictated by one of two methods:

  1. If you are with a PEO, the rate is proposed, and if with a reputable PEO, notice is given at least 30 days before an increase is going to take effect. One of the excellent selling points I always liked is when being with a PEO; it is more like a “fixed mortgage rate” than the “adjustable” one when doing payroll in house.
  1. If you are doing your payroll “In House,” which means through QB, an Accountant or Payroll Service, your State Unemployment rate has always been assessed annually according to your “own” Unemployment Claims

Will the Government decide to spread out, in some fashion, the impact this has caused our Country to lower the impact on companies that had more than their share of claims or assess it like the days of yore? 

It is yet to be announced, but I think it is essential to start thinking about preparing for tomorrow

Keep in close contact with your PEO payroll tech, Accountant, or State Unemployment Office so that you have as much notice, as possible, for a potential increase over the next few years so that you can build this cost/pass it along into your business model.

ALWAYS keep a close eye on your invoicing so that nothing is slipped in there without your knowledge.  Perhaps you’ve signed a contract that allows your PEO to increase taxes when they are only passing the increase along to you.  That is fine, but YOU need to be aware of it in advance so you can bid this increase in your future work!

  • If you are bidding on jobs, most businesses put an expiration on their quotes, but if you haven’t practiced this in the past, now would be an excellent time to get into the habit of making this more clear. (When I was in the construction trades, sometimes, builders would not pick up my services for 6-8 months after I bid on a job, so this is why having a 30-day limit is a good idea right now)
  • If you have many part-time employees, you may want to work your business model into utilizing more full-time employees. Why?  Because the State Unemployment Tax applies to a certain threshold in each State.  In Florida, for example, The State Unemployment tax goes away after an employee hits $7,000 in annual wages.
  • Last, but never least, always follow as much common sense as you can when it is necessary to terminate an employee.  If you are with a PEO, contact your HR Rep, and they can walk you through a step by step process.  If you are on your own without a PEO, here is some useful information:

How to Keep your “In House Unemployment Claims” under control…

You may be surprised to learn just how easily a former employee can establish a successful unemployment claim. Many employers’ biggest misconception is that terminating an employee for substandard performance will disqualify the individual from receiving unemployment benefits.

In most states, the reality is that unless the employee’s behavior rises to a level of “misconduct,” they will be deemed eligible for unemployment benefits. That means terminating an employee for “poor performance,” “incompetence,” or “inability to perform the job” will almost always result in the state unemployment agency deeming the former employee eligible for unemployment benefits, which may adversely affect a business’s SUI rate.

To further complicate matters, not only does an employer have to show that the employee’s behavior constitutes misconduct as defined by state law, but they have to prove that the claimant either knew or should have known that they could lose their job as a result of the behavior. To successfully contest unemployment claims and protect your SUI rate, it’s critical to keep documentation that clearly illustrates these points.

So what to do? Here are some best practices for both before and after terminating an employee:


Provide the employee with a written warning regarding the misconduct

Although no law requires notice before termination, doing so may help in defending a potential unemployment claim. Suppose employees have been led to believe that certain disciplinary steps will occur before termination (such as verbal or written warnings). In that case, the employer should make a good faith attempt to follow those steps or risk losing the unemployment claim.

Distribute an employee handbook and obtain signed acknowledgment forms

Employers have a much better chance of successfully defending an unemployment claim if they can cite the violated policy. Distributing an employee handbook is an excellent way of demonstrating how employees were made aware of the policy and non-compliance consequences.

Investigate all workplace complaints

In most states, if an employee resigns with “good cause,” they will be eligible for unemployment benefits. If the individual can show that they complained of a severe workplace concern, but the employer took no action to address the allegation or if the employer retaliated somehow against the claimant, the former employee is generally eligible for unemployment benefits.

Remember the “reasonable person” standard

This is a standard guideline used when making unemployment decisions. Considering whether a reasonable person would terminate an employee given the circumstances before making the termination decision is a crucial step in the process.

Treat employees fairly and consistently concerning termination decisions

State personnel processing unemployment claims are themselves employees, not employers, and they will have opinions about what they consider fair treatment. It is essential to keep this perspective when terminating employees.



Submit all unemployment-related paperwork on time

Suppose an employer fails to return the state unemployment division’s request for information relating to the reason for the termination or separation. In that case, it could be considered a “disinterested party,” and the claimant may automatically receive unemployment benefits. Be sure to keep your address with the state unemployment insurance agency up to date, so there are no delays receiving requests for information.

Include documentation that supports your case

This can include:

  1. Copies of the signed employee handbook demonstrate that a company rule was violated.
  2. Copies of corrective action.
  3. Copies of performance reviews prove that the employee was aware that their job was in jeopardy and didn’t correct the behavior by the agreed-upon deadline.

Appeal the decision if you disagree

If you disagree with the initial determination, you have the right to appeal. Submit the appeal paperwork on time and request a telephone hearing.

Prepare for the appeal hearing

Don’t waste everyone’s time by showing up with a defense of “This is a travesty of justice,” or “They’re lying.”

Attend the appeal hearing

This should be an obvious requirement of this process.


There’s no secret formula for protecting the SUI rate. Develop the processes, implement them, and follow them. Do all those things, and you’ll be in good shape.

Friends do not allow friends to do their own payroll administration…Please pass this article along~

This post is to be used for informational purposes only and does not constitute legal, business, or tax advice. Each person should consult his or her attorney, business advisor, or tax advisor concerning matters referenced in this post

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Joni Prose