Corporate Payroll Services

What can employers do to positively impact their SUI rate?

In an earlier post we talked about how state unemployment insurance (SUI) rates are determined.  One of the key elements that impact your company’s SUI rate is the number of unemployment insurance claims against it.

Controlling your company’s rate starts with managing the employee disciplinary process.  If you are considering terminating an employee, you run the risk of an increase in your unemployment tax rate.  Depending on the circumstances associated with the termination, as well as how you have documented company actions and your rationale behind the termination decision, you may be able to contest the claim.  Not only will you need to show that the employee’s behavior rose to the level of “misconduct,” you will also need to demonstrate that the employee knew or should have known that they could lose their job as a result of their behavior.

Know the process for responding to a claim

Employers are often surprised at how easily former employees can establish successful unemployment claims.  Any former employee can file a claim for unemployment benefits.  States have similar eligibility criteria: (1) the employee is unemployed (2) through no fault of their own and (3) is looking for and able to work.

Once a former employee has filed a claim, the state unemployment agency will reach out to you with a request for information.  If you plan to contest the claim (so as to keep your SUI rate low) you will need to provide documentation to support your position.  The state claim examiner will review all the information and render a decision regarding the employee’s benefits eligibility.  If they are deemed eligible, the benefits are paid by the state directly to the individual.

Even if the state awards benefits to the employee, you can still appeal the decision.  However, there is usually a very tight deadline.  Appeals usually go to an administrative law judge.  The hearing will be held over the telephone, but is as formal as a court hearing.

Documentation and consistency are key to success

In order to mitigate the establishment of successful unemployment claims and continue to influence your SUI rate, here are some best practices to consider prior to terminating an employee:

  • Distribute an Employee Handbook and obtain signed acknowledgment forms.  You have a much better chance of successfully defending an unemployment claim if you can cite the specific Employee Handbook policy that was violated by the former employee.  Distributing an Employee Handbook with an acknowledgement receipt is an excellent way to prove that employees were made aware of policies and expectations, as well as the consequences of noncompliance with workplace rules and guidelines.


  • Provide the employee with a written warning regarding the misconduct prior to termination.  Although a private, non-unionized organization is not required to warn an employee prior to termination, doing so may help you in contesting a potential unemployment claim.  If you have communicated to employees that certain steps will be taken prior to termination, you should make a good faith attempt to follow those steps.  Otherwise, you risk losing the unemployment claim.


  • Investigate all harassment, discrimination, wage and hour, and other serious workplace complaints.  In most states, if an employee resigns for “good cause,” they will be eligible for unemployment benefits.  If the individual can prove that they complained of a serious workplace issue, but the employer did not take meaningful action to address the allegation or somehow retaliated somehow against the individual, the employee is generally awarded unemployment benefits.


  • Consider the “reasonable person” standard.  This is a common standard used when making unemployment decisions.  You should consider whether a “reasonable person” would terminate an employee given the circumstances prior to making the decision to terminate the employee.


  • Treat employees fairly and consistently regarding termination decisions.  It will be more difficult for a former employee to successfully make an unemployment claim if you have documented evidence that an employee’s separation was done consistent with your organization’s policies and past practices.

Pay attention to fraud, too

With the rise of identity theft and fraud, you should carefully review unemployment insurance claim notices received from your state agency to determine if there are any discrepancies and report any concerns.  Be on the lookout for names and social security numbers of individuals who are currently employed by your company as well as people who never worked for the company.

In the end, it’s important for you to document, challenge and pay attention to the claims that come through in order to manage your unemployment tax rate, since it is one tax rate over which you have some degree of control.

For more information on creating an Employee Handbook to define the policies employees must follow and to assist you in both documenting and appealing unemployment insurance claims, contact the HR Pros at our HR Support Center, who contributed to this post.

HR Support Center