Question

Over the past two years, Kermit Stone, the controller of Hilton Company, has been concerned that the company has been paying a large amount of money for state unemployment taxes. On reviewing the “unemployment file” with the head accountant, Deborah Murtha, he learns that the company’s tax rate is near the top of the range of the state’s experience-rating system. After calling the local unemployment office, Stone realizes that the turnover of employees at Hilton Company has had an adverse effect on the company’s tax rates. In addition, after consulting with Murtha, he discovers that the eligibility reports that come from the state unemployment office are just signed and sent back to the state without any review. The eligibility reports are notices that an ex-employee has filed a claim for unemployment benefits. By signing these reports “blindly,” the company, in effect, tells the state that the employee is eligible for the benefits. Any benefits paid are charged by the state against Hilton Company’s account. Stone is convinced that the rates the company is paying are too high, and he feels that part of the reason is the “blind” signing of the eligibility reports. Besides this, he wonders what other steps the company can take to lower its contributions rate and taxes.

Question to be Answered: What are THREE recommendations that you could give to Stone that might help reduce the “unfair” burden that the state unemployment compensation taxes are leveling on the Hilton Company?

Answer 1

Almost every Business Owner thinks State Unemployment taxes are just another costs of doing business. State Unemployment Taxes (SAT) are calculated for each individual employee each year. And Employee Turnover can lead to high State Unemployment Taxes.

First and the Foremost Recommendation for Stone is to reduce Employee Turnover. This should be done by avoiding layoffs by moving employees to other tasks or areas. Also Organization can avoid firing in one department and hiring in another one when there is a possibility of transferring employees to another department. As every time company fires an employee, that employee files a claim for unemployment benefits, which will again post negative impact on state unemployment taxes.

The Second One must be to Contest Questionable Claims. While most of the claims may be valid, many claims are even approved as invalid by workforce boards. For this Stone might develop a separate team to track Questionable Claims or even can track it by himself. This will always reduce company's Unemployment Taxes to some extent.

And the Third Recommendation would be to Follow Sound HR Practices. Employee Performace appraisals should be conducted often and should be given promotions for deserving at the right stage. Many Companies with Poor Hr Practices Fires their employees for no reason and then they files claim for state unemployment taxes which ultimately lead to high State unemployment Taxes Payment.