You can take steps to reduce the cost of unemployment insurance, which provides short-term financial assistance to people who become unemployed through no fault of their own. The New York State Department of Labor (DOL) determines who qualifies for benefits and individual employers fund their own programs.
Review Claims for Propriety
After you terminate an employee and file for unemployment insurance, DOL will determine whether or not the employee is eligible for benefits. If they are, DOL will send you a notice of entitlement and potential charges. You’ll have an opportunity to comment and specify the circumstances that resulted in unemployment. Managers should review these notices promptly and completely.
Claims are charged to your account and could increase your tax rate in future years if your government uses the tax contribution method to fund unemployment insurance.
Document your reviews thoroughly and ensure that they’re handled by appropriate officials, usually the person responsible for maintaining the payroll records and the former employee's immediate supervisor.
Start with a Comprehensive Written Policy
A written personnel unemployment policy provides a solid foundation for minimizing unemployment insurance costs. This policy, which requires periodic review, should include:
- a long-range personnel plan to deal with possible increases and decreases in workload requirements
- a clear job description for each position, outlining any factors that could ultimately impact eligibility for unemployment benefits
- guidance for creating new job titles or filling vacant positions
- staffing factors that will affect unemployment costs (for example, full-time versus part time, temporary versus permanent and reallocation of duties).
A comprehensive plan allows you to determine the potential layoff costs and also provides the information needed to identify the preferred unemployment insurance funding option.
Select the Most Economical Funding Method
Local government employees in New York State are generally covered by the State Unemployment Insurance Program, administered by DOL, and funded by individual employers.
Unlike most businesses, government entities can choose to fulfill their funding obligations in one of two ways.
| Tax Contribution Method | Benefit Reimbursement Method |
|---|---|
| Governments pay a quarterly tax based on a portion of annual earnings of each eligible employee. Rates are determined using a DOL index based on each government's individual experience rating. |
Governments contribute by reimbursing DOL for all unemployment benefits paid to their employees. |
A study found that the reimbursement method was less costly, but you’ll want to make a comparison to verify that this method will result in savings for your locality before switching methods.
Follow three steps to compare the cost of the unemployment taxes paid with the actual benefits paid out.
- Determine the number of employees listed on the quarterly report, NYS-45 Quarterly Combined Withholding, Wage Reporting, and Unemployment Insurance Return.
- Recalculate the tax amount on the quarterly report and verify that all wages were reported properly.
- Check your DOL Employer Account Balance and then calculate the balance yourself:
- Take the account balance at the beginning of the year, adding to it all the timely normal tax contributions paid.
- Subtract any unemployment benefits charged to your account in that year.
DOL notifies employers of their account condition for the previous calendar year. Employers can also call DOL toll-free at (888) 899-8810 for the amount of the Employer Account Balance. A high positive account balance may represent unnecessary taxes paid to DOL and indicate that you could save money by switching to the benefit reimbursement method.
Keep in mind, however, that changes in your workforce size may impact potential costs. For example, a school district facing an upcoming fiscal crisis and possible layoffs may want to build up an account balance. Otherwise, it risks having to reimburse DOL for high unemployment costs when it can least afford them.
Submit a written request to DOL to use the reimbursement method
If you decide to use the reimbursement method, note that local governments and school districts must generally submit a written request to DOL before the beginning of the calendar year. See the Department of Labor website for more information.
Resources
Office of the State Comptroller:
NYS Department of Labor:
- Employer Guide to Unemployment Insurance, Wage Reporting, and Withholding Tax (NYS-50) [pdf]
- Unemployment Insurance: Employer Overview
Updated 2016