What Is Unemployment Insurance?

When the U.S. implemented the Social Security Act of 1935 during the Great Depression, it was decided as a country that people who lost work to no fault of their own would receive some economic relief. Unemployment insurance laws are currently governed and controlled by individual states. Some states already offered it. Wisconsin was the first state, in 1932, but Utah had unemployment insurance laws before 1935 as well. So did California, Massachusetts, New Hampshire, New York, and Washington state. People within the U.S. at the time were deeply conscious of a need to help others, because the entire country was struggling with the economy. The 1935 Act was signed by President Franklin D. Roosevelt; the U.S. Supreme Court decided it was constitutional in 1937.

Today, unemployment insurance protection is still a very meaningful program for both employers and employees alike, especially in times of economic recession — the Great Recession immediately comes to mind — as well as mergers and reductions in force. Its main function is to provide temporary income protection. However, it is not meant as a way to support anyone who isn’t willing to work. If an employee quits a job voluntarily and without good cause, is fired for misconduct, or refuses to apply for or accept suitable work, that person may be disqualified from receiving benefits.

Key Terminology

This is not to say that a person can’t quit. People can quit for a good cause, or they can quit for a reason that is “not contrary to equity and good conscience,” and still get unemployment benefits. One example of a good cause is defined as being asked to do something that is either illegal or unsuitable. Equity and good conscience is defined as a situation where the person claiming unemployment was acting in a “logical, sensible, or practical” way by quitting. The reason for quitting might not be enough to be considered a good cause, but if it would be “unreasonably harsh” or unfair to deny benefits, and the former employee is still interested in working somewhere else, then that employee might very well be entitled to unemployment benefits.

The idea behind finding out why someone left a job before making a decision about unemployment benefits is to prevent people from getting benefits when they quit just because they didn’t want to work at a specific company anymore.

There are other protections for the employer as well. In Utah, someone who wants to apply for unemployment benefits has to have worked recently for at least a year, and the work has to be recent; for example, the year has to be within four of the last five calendar quarters. In other words, people can’t get a job for just a short time and then expect to qualify for unemployment benefits on that basis.

Who Pays For Unemployment Insurance?

Contrary to what most people think, unemployment insurance is not paid for, or provided by, the federal or state government. Instead, indiUnemployment Insurance vidual employers pay it on the basis of the company’s experience rating (EMOD), which is determined by the number of unemployment claims paid by the state on behalf of a particular employer during a given period of time. In some ways it is like other insurance. If a company has higher unemployment claims, it pays a higher tax rate. To facilitate the program, the government uses Federal Unemployment Tax Act (FUTA) & State Unemployment Tax Act (SUTA).

What to do about fraud

Although unemployment is a vital benefit for employers and employees alike, fraudulent claims have a negative effect on employers and the country as a whole. Suppose an employee is fraudulently collecting unemployment. Perhaps the employee actually quit voluntarily, or was fired for cause, even though the employer could not provide proof of misconduct. An employee who fraudulently collects unemployment increases an employer’s SUTA rate unnecessarily, increases the country’s unemployment rate and uses government resources that should have been allocated somewhere else.

Preventing unemployment fraud is one excellent reason why companies should have a progressive discipline plan in place; the plan protects the employer, doesn’t waste government resources, and stabilizes the program for its intended purpose, which is helping workers who need it. It can also reduce an employer’s legal liability, because following the program, when done right, establishes that a former employee was treated fairly. Even in a state that has at-will employment, wrongful termination is still something every employer ought to avoid. Please review our article about progressive discipline for more information.

Processing claims

Another important factor in unemployment claims is properly managing and processing the claims. The more information you have as an employer, in terms of tracking written warnings, keeping accurate time cards and proactively responding to claims, the more easily you can manage your SUTA rate and ensure that it is accurate. The state will conduct unemployment audits to ensure employees haven’t been working for you and also receiving insurance benefits simultaneously. These audits have a simple format where the employer reports the number of hours worked by the employees. If an employer is too busy to maintain time records, then the employer can’t give those records to the state, and problems develop. Without accurate, timely records, it’s all too possible for an employee to be paid insurance benefits and wages at the same time.

In conclusion, unemployment insurance is a beneficial program for employers and employees when it is used correctly because it provides a welcome safety net. But with the effects of the recession still apparent in today’s business world, it’s more important than ever to be prepared to defend your business by implementing a progressive discipline policy for your workforce and by contesting fraudulent claims.

If you would like to find out what your turnover rate is, and gain a better understand of how unemployment is affecting your company, please contact the WTA HR Department.

Mistakenly classifying an employee as an independent contractor can result in significant fines and penalties.
There are 20 factors used by the IRS to determine whether you have enough control over a worker
to be an employer. Though these rules are intended only as a guide — the IRS says the importance of each
factor depends on the individual circumstances — they should be helpful in determining whether you wield
enough control to show an employer-employee relationship. If you answer “Yes” to all of the first four
questions, you’re probably dealing with an independent contractor; “Yes” to any of questions 5 through 20
means your worker is probably an employee.

The U.S. Supreme court upheld Obama’s Affordable Health Care Act (more commonly known as Obamacare) on June 28, 2012 in a 5-4 decision. Many businesspeople hoped the Supreme Court would strike down Obamacare, turning it from an urgent problem into a nonissue. That hope is now gone.

If you are a small business owner with more than 50 employees and you haven’t decided what you are going to do about Obamacare, now is the time to fi gure out your strategy.

What Obama Care Means Today

Some aspects of Obamacare are good. Nobody likes it when insurance companies refuse to insure someone because of a preexisting condition or put lifetime policy caps in place. Getting a checkup without a copay, and being able to cover a child up to the age of 26, are also benefi ts. These aspects of the law are unlikely to go away.

In addition, the new laws force insurance companies to be more transparent than has been required previously: they have to explain why premiums are going up, and they can be barred from participating in the state exchanges if states find that they are raising premiums arbitrarily. Additionally, insurance companies can’t have too high an overhead. If they spend less than 80 percent of the premiums on actually providing medical care, they will now have to refund that money.

At the same time, some states are cooperating and some states are exploring perceived wiggle room to see just where they can get away with business as usual. It’s anyone’s guess what the final law is going to look like.

The big problem is the cost. You already know that U.S. healthcare is expensive. The motivation behind healthcare reform is the promise of lower premiums down the road as the U.S. healthcare system becomes more efficient. Unfortunately, we are a long way from that point.

• Many experts are worried that short-term costs will increase and that those costs will be passed on to consumers who can ill afford them

• The Congressional Budget Offi ce estimates that government spending on health care will increase from the current rate, which is 17 percent of the gross domestic product, up to 25 percent in 2037.

• State Medicaid costs are going to increase. States will be required to cover everyone who makes up to 133 percent of the federal poverty level. That means millions of working families are going to be eligible, not just those who are officially defined as poor. Although federal funding will pay for this expansion until 2017, states will have to start taking over after that point. States will also have to pay more for doctors and more for medical facilities because they will have to deal with many more patients than before.

• By 2014, states will have to set up Small Business Health Options Programs, or exchanges, where small businesses can create purchasing pools. A larger pool of people, obviously, has an advantage over a smaller group when it comes to buying insurance. The size of the businesses that can join will vary from state to state. A small business is definitely not more than 100 employees, but states can also limit the pool size to companies that have no more than 50 employees through the end of 2016. If a company outgrows the size limits, it will be grandfathered in. The advantage of bargaining for insurance as part of a larger pool should cause premiums to decrease.

• Taxes are going to go up for those who are wealthy. In January 2013, there will be a Medicare surcharge of 0.9 percent for individuals who earn more than $200,000 per year; for families, the magic number is $250,000. There is also a 3.8 percent tax, aimed at wealthy citizens, that will tax “unearned income.”

Getting good professional advice – in the form of an insurance agent – is key when it comes to deciding how to navigate the changes to come. The best strategy for you is going to depend, to some extent, on whether you already offer insurance to your employees. Below, some important points to consider and discuss.

The Tax Credit

If you have a small enough business, Obamacare still might not affect you negatively. For example, very small businesses won’t be penalized if they don’t provide insurance, and the federal government has been offering a tax credit to the very smallest businesses. As you would expect, smaller businesses are eligible for bigger tax credits.

Many companies that qualify for this tax credit benefi t have not taken advantage of it, even though it has been available since 2010. They say the benefi t isn’t big enough What ObamaCare for the amount of work required to get it. Some 170,300 companies received the tax credit in 2010, although somewhere between 1.4 million and 4 million companies were actually eligible. It will be interesting to see whether interest from companies increases over time, or if the federal government will sweeten the deal to increase participation.

Skipping Insurance

McKinsey & Co. estimated in June 2011 that 30 percent of employers are going to get rid of their employee health plans after 2014. In addition, the survey found that some 85 percent of employees would prefer to keep the job and lose the insurance than switch jobs in order to get insurance.

You have to admit, choosing not to provide insurance is both bold and simple: All you have to do is pay the penalty. If you can afford it and your employees are unlikely to go elsewhere, then the bottom-line truth — at least in terms of plain dollars — may be that paying fines might be cheaper than paying for insurance. If you couple that approach by paying your employees the money that was previously going for insurance, they’ll see a wage increase, too. Isn’t that a win-win for everyone?

Not completely. Employees still have to get insurance. If they don’t, they face a fine, too, and it will get bigger as time goes by: in 2014, it is a modest $95 or 1 percent of their income. In 2015, it is $325 or 2 percent of their income. And there’s a big difference between what pre-tax and post-tax dollars can buy. When you buy insurance on a company level, being able to use pre-tax dollars effectively creates a nice discount for your employees.

What happens if employees, faced with reality instead of an abstract decision, decide they really are better off changing jobs? You can’t control what other companies are going to do, but if you don’t offer insurance, and your employees can get it somewhere else, are you really sure they won’t take the opportunity?

Not buying insurance for your employees is like playing chicken. It may be a gutsy approach, but being gutsy is not the same thing as being wise. You don’t know what is going to happen in the future, but deliberately offering a deal that is second-best means you may well lose your best employees to better opportunities.

Going Out of Business

Another alternative is to let the business go. If you don’t have a small business, no one can force you to buy insurance for your employees. However, this is a short-term and short-sighted decision. Owning your own business has always been one of the best ways to build wealth. Unless you want to retire anyway, a better alternative would be to fi gure out how to stay in business and take care of your employees at the same time.

How Insurance Companies Are Responding

According to a Bloomberg Government Analysis, insurance companies have been keeping a close eye on all these changes, and it shows in their business strategy. Since Obamacare was passed into law, private insurance companies have become increasingly involved in public health insurance programs. This is despite Republican predictions from Rick Santorum and Michele Bachman that government would take over the insurance industry. The truth is that the insurance industry is still thriving. Coverage is stable, there hasn’t been any substantial acceleration with respect to cost growth, and profi ts are stable.

Increasingly, insurance companies are putting their money into managed-care programs for Medicare and Medicaid, with revenue from these programs accounting for more than 40 percent of what they make. At the same time, commercial business revenue is now less than half. The Bloomberg analysis was based on the financial filings for the five largest publicly traded companies and one nonprofi t: Aetna, Blue Cross-Blue Shield (the nonprofi t), Cigna, Humana, UnitedHealth Group, and WellPoint. These six insurance companies cover one out of every three people who have insurance.

Clearly, these companies expect Obamacare to be fully implemented, and they are preparing their business plans accordingly. They were not waiting for the Supreme Court to vote; they’ve been busy for years with new plans.

Insurance companies cater to their customers just like any other business. Since Obamacare will require that you look for insurance solutions, insurance companies will be eager to provide them.

Change is unsettling. However, the moreknowledge that you are able to acquire, the better your decisions will be.

It used to be that most people died soon after retirement at 65. Those days are gone, and they aren’t likely to come back anytime soon. As a responsible business owner, it’s important to understand the benefits and risks behind hiring someone older.

You already know the risks. In September 2006, the Society for Human Resource Management (SHRM) released the results from an email survey about hiring older workers that was sent to HR professionals.

Some HR professionals did report disadvantages:
• Older employees might bet set in their ways and sometimes are not as adept at new technology as their younger counterparts. They may need additional training, and they may lack flexibility.
• They might be old enough to have one or more chronic diseases, which makes them more expensive when it comes to medical care and insurance.
• They prefer flexible hours, but not all businesses can give them this benefit.

An older employee may have very real physical limitations that require accommodation. If the employee is on Medicare, there are earning limitations. You can also be sure that older employees are probably not going to stay with your business for thirty years, although they may well stay for ten or twenty. Older employees do value relationships more; there are benefits to this, but it is also true that relationships can affect efficiency and productivity. An although younger employees may not have the perspective yet to appreciate what older employees offer, that’s a disadvantage for the younger employee, not the older one.

Interestingly enough, though, HR managers were positive about hiring older people. Some 71 percent of those surveyed thought older workers had invaluable career experience, but only 49 percent thought older workers didn’t adequately keep up with technology, and only 36 percent thought health-care costs were an issue. These are not overwhelming statistics. The remaining percentages citing disadvantages were even lower; in fact, 24 percent said they didn’t see any disadvantages at all to hiring older workers.

The top reasons for hiring older employees were as follows:
• Older employees have invaluable work experience, including diverse thoughts and approaches.
• They are usually able (and willing) to mentor younger, less-experienced employees.
• They can take on part-time or seasonal work. In fact, they often prefer it.
• They are reliable and have a strong work ethic.
• Older employees have a serious commitment to work, and they are loyal.
• Many times, they already have established, long-term networks of clients and contacts

Of those surveyed in 2006, 100 percent thought hiring older people had advantages. Although these HR professionals were careful to note that it is wrong to stereotype any employee by age, they also said that older employees can make excellent team players and are often more patient than younger employees.

In fact, it is possible that some of the negative responses had more to do with bias than with reality. An article that appeared on Entrepreneur.com about hiring older employees echoed the results of the SHRM survey. It listed some reasons why it might be smart to hire older employees:

• Young employees can be careless. Older workers, who are dedicated to doing the best possible job, are often the ones who find and correct mistakes. That kind of person can potentially save your business a great deal of money along the way. For example, a 75-year-old clerical worker noticed that a mailing effort worth more than $50,000 had a one-digit mistake in the zip codes. The mailing house and the marketing manager both missed this error; the 75-year-old did not. How many mistakes of that magnitude can your company afford to eat?

• Punctuality, honesty, and an insistence on doing things right even if it means staying late are old-fashioned virtues … and older employees often have them
in full measure. They take pride in what they do, and they can be extremely hard working.

• Training has as much to do with a willingness to listen and change direction as it does with having good hearing. Someone who is older may actually be easier to train than someone who is younger, because older employees are less likely to need repeated reminders. Once they’ve got something, they don’t usually just ignore it. Younger employees — impatient, ambitious, and not really team players yet — may do just that. Youth does not mean compliance. Sometimes
it means rebellion.

• Older employees are often have strong organizational skills. This is significant, because businesses lose about a million hours of work each year because of disorganization within the workplace.

• Most older people have developed communication skills and tact. They aren’t seeing workplace politics for the first time, and they often know exactly how to deal with it.

• They aren’t shy about sharing what they know, they tend to know a great deal, and they have the maturity to put it all into perspective. Sometimes younger employees are intimidated by the mere fact of being within an organization. Every company needs people who will speak up when it counts, but sometimes that’s easier to do for older employees than it is for younger ones. It’s like a 50-year-old taking a class from a 30-year-old professor. The dynamic is totally different than it would be for someone who is 18 years old and on campus for the first time. The older student will still be respectful, but will also have the confidence that comes from life experience.

• Their salary and benefits may be less expensive than those for someone who is younger. If they own their own home and have insurance from some other source, or even a pension from another company,they can focus more on what they want to do and less on just covering their living costs. Older employees may not be there for the money as much as they are for the satisfaction and involvement of still being productive and valued. If they have debts, they are very motivated to make sure they take home that all-important paycheck.

• It sets a good example. Employees are smart enough to know when a company respects all its employees, regardless of age, and older employees are often excellent models who are more than happy to mentor and train. And it is just smart business to teach the lesson that your business values diversity, including the diversity that comes from age. At some point, most employees will get older themselves. It’s good for them to know they work for a company that values them regardless of age.

Perhaps the most compelling reason to hire older workers is this one. You need them. The truth is, there are more jobs than there are people to fill them.

• Even when the economy is bad, 20 to 30 million jobs still have to be filled. But you don’t see many large families anymore in the U.S. Those who do have large families are often from other countries and may not have the same strength when it comes to education as those who are older.

• Most companies haven’t thought far enough into the future. They have been so busy cutting costs and exporting jobs offshore in order to stay in business that they’ve neglected training new talent. As Colin Powell observed in his book It Worked for Me, the military pays a great deal of attention to mentoring future leaders because they don’t hire from outside. Yes, the U.S. is very large, and outsourcing work has been a popular strategy for many companies … but far too often, the profits erode and the work comes back home again. That places business owners in the same situation as the military: you need to mentor, too.

An older employee is someone who has verifiable history. That’s a tremendous advantage, but they are also often more motivated than their younger counterparts. One expert said their motivation score is higher (at 78.4 percent) than the 71.2 percent for someone between the ages of 18 and 29.

Research has shown that, far from being a burden, older employees actually miss fewer days than younger ones. According to SHRM, their turnover rate is less than the one for younger ones, too. That matters, considering that turnover costs are about a third of an employee’s annual salary. And many of them are healthier than the last generation. Many older employees are obviously still healthy and vital.

It’s important to hire the right person for the job, but the right person might well be someone older. If that’s the case for your own business, then you should give older potential employees serious consideration. It’ll keep you on the right side of the law — always a good idea — and if you select the right people, they will make your company stronger and better.

And isn’t that the thing that really counts?

BULLYING AFFECTS YOUR BOTTOM LINE

Most people who are targeted by bullies try to deal with the problem for almost two years before leaving the job. According to Harrison Psychological Associates, the cost to employers of that two-year period adds up to $180 million, in part because bullying makes productivity go down. Bullying is also a huge time waster. It’s hard to work if someone is actively and continually attacking you, after all, and it’s also hard to do what you’re supposed to if much of your time is spent tormenting someone else.

WHO’S THE BULLY?

Most bullies are poor managers who think that the best way to manage is through intimidation and fear. According to one recent study, those managers who were surveyed thought that the following factors played a contributing role to bullying at work:

• Lack of managerial skill (66%)

• Personality (57%) • Authoritarian management style (56%)

• Inaction when bullying occurs (37%)

• Too much work, work that the employee is not qualified to do, and unrealistic standards or deadlines (27%)

An insecure manager without adequate training who thinks being a good boss means being arbitrary, demanding, and unpleasant is a prime candidate for becoming the local bully and making life miserable throughout your office.

WHO’S THE TARGET?

When you’re younger, those who are perceived as different or weak are targets for bullies. Adult bullies in the workplace, however, have a different agenda: they still target perceived threats, but it’s the threat of excellence instead of the threat of diversity.

Someone who is productive, intelligent, honest, capable, and well-liked can make a bully look bad by comparison. This is especially true if the bully is a manager, and the target is someone who brings real ability to the company. As a result, the bully wants to control or get rid of the target instead of doing some constructive mentoring instead. Which employee do you want to keep and reward? The bright, personable, productive target, or the intimidating manager who thinks bullying is either a good way to manage or an effective self-preservation technique?

WHAT INACTION GETS YOU

Bullying is not just a schoolyard problem. This is a big enough issue that it presents a key problem for your company to solve. Yes, you can neglect it; that’s what many companies do. They don’t interfere, or sometimes they even criticize the bully’s target for not being more productive or for not doing a better job of handling the bully’s attacks.

Unfortunately, however, bullying is usually not something that can be stopped effectively by the target; an employee does not have the necessary clout, especially if the bully is at a higher organizational level. The Workplace Bullying & Trauma Institute says the percentage of those who will choose to solve the problem by leaving the company is at 70%.

Leaving an abusive job might be a great solution for your employee, but guess who’s on the losing side of the deal? You are. Not only have you lost a valuable person, you’ve also got all the costs of finding someone new and training that person to fill the hole. Worse, you haven’t solved the problem that caused the bully’s target to leave, so you may see the whole cycle start over again. And then there are the legal risks. Bullying represents a rich field of opportunity for lawyers.

Of course, the main reason people let bullies get away with bad behavior is not because they like or approve of the behavior. It is difficult and unpleasant at the best of times to tell people they need to change. In How to Deal with Workplace Bullies Bullying and the Risk of Legal Action the case of talking to a known bully, you already know the bully can be awful to deal with; the entire conversation could blow up in your face. It’s no wonder, then, that so many companies avoid a blowup by never even starting the conversation.

EFFECTIVE MEASURES

The single most important thing you can do as the owner of a company is to make sure you do something to solve the problem instead of pretending it doesn’t exist. You have to hold bullies accountable for their conduct. Ignoring bullying behavior, or even rewarding it, sends a chilling and repressive message throughout your company’s culture. It also increases your liability from a legal point of view. When it comes to bullying , courts expect you to have both a policy against it and a clear path for resolving problems.

Get your managers some good training . They need to have a healthy model for managing employees that doesn’t involve bullying. They also need to be able to evaluate the social environment at work so they can specifically challenge negative and harmful behaviors such as bullying. In particular, they need to understand the situation well enough so that they don’t inadvertently give the target a poor performance review. After all, the problem behind inadequate productivity is not the person being bullied, it’s the person who created an impossible work environment.

Educate employees about bullying so it’s clear what is, and is not, acceptable behavior at your company. Write an anti-harassment policy, and make sure that someone who is being attacked can go as high within the company as necessary in order to solve the problem. If an employee’s manager is the source of the problem, you can’t reasonably expect that the same manager is going to be willing to fix things for that employee. Encourage people to talk to management when bullying occurs, and be willing to let the person who has been targeted transfer into another area of the company if that would effectively solve the situation. It’s better to have an employee change jobs than leave the company completely.