The national average UI overpayment rate is almost 13 percent (actual overpayment rates by state range from about 5 percent up to 31 percent). The average employer only wins about 50 percent of the protests that they file which further contributes to inflating the charges to their account and leading to increased UI costs.

Currently, the average unemployment claim costs employers around $4,700 in actual charges to their account, and the increased costs due to tax rate increases can be significantly more (up to $13,000 or more).  In times of economic hardships, the average costs can double these numbers. When you pay UI Taxes, you pay your UI tax rate multiplied by the taxable wages for each employee who works for you each year. You don’t only pay taxes on those who claim unemployment.

Because most companies handle the claims management process manually, they are spending about 50 percent or more labor on this than companies who use a software program to assist them. Utilizing an internal software improves the efficiency and quality of their existing unemployment claims and frees up the time to focus on reporting. Doing this turns their claims management program from a reactive to a proactive approach in which they are identifying and correcting negative trends resulting in reduced unemployment claims and charges and ultimately and a decrease in their company’s UI Tax Rate.

What Do These Numbers Mean?

UI payouts are on a case-by-case basis. Let’s run a few scenarios:

Employer A
1000 employees with a 6 percent UI Tax Rate and a $15,000 taxable wage base pays $900,000 in UI Taxes each year.
With a 13 percent average overpayment rate, this employer paid an extra $117,000 in UI costs each year.

Employer B

200 employees with a 5 percent UI Tax Rate and a $23,000 taxable wage base pays $230,000 in UI Taxes each year.
With a 13 percent average overpayment rate, this employer paid an extra $29,900 in UI costs each year.

Employer C
10,000 employees with a 6 percent UI Tax Rate and a $12,000 taxable wage base pays $7,200,000 in UI Taxes each year.
With a 13 percent average overpayment rate, this employer paid an extra $936,000 in UI costs each year.  

Whether you are a small single-state or a large multi-state employer, one thing is universal — these are some very frightening numbers. Now keep in mind that the error/overpayment rate could be much higher (as much as 31 percent). In other words, the aboveformentioned scenarios just give an average overpayment rate and in many cases, it could be much worse.

To get assistance with these costs visit UI Steward and Unemployment Tracker for more information.