How do Benefit Charges Work for Employers?

What is a Benefit Charge?

To fully understand the full impact of benefit charges, we must first understand exactly what a benefit charge is. When someone applies for unemployment and then gets deemed eligible to collect unemployment benefits, they are then paid out money. In some cases, the State will even pay out unemployment benefits before a determination is made. The State will make a monetary determination (often times this is stated on a claim form) to determine the maximum dollar value that a claimant can collect. Usually this is based on the amount of money that the claimant has earned within a certain period of time.  Each state has different minimums and maximums for the total amount of benefits that can be paid out to a claimant.


Benefit charges against a company?

So where does all of that money being paid out come from? Well, it depends on what kind of employer you are. Certain companies such as non-profits qualify to be reimbursable employers, which means that you pay dollar for dollar when someone collects unemployment against your organization. This will also depend on the state that you operate in.

Generally speaking, most employers are tax rated, meaning that they have an unemployment tax account with the state. Just like every other tax, each employer is assigned a specific tax rate. So the more you pay out in benefits, the higher your tax rate is going to be. Conversely, the less you pay out in benefits, the lower your tax rate will be. 


How can I decrease the amount of Benefit Charges to my account?

There are a few ways to do this. The first is to make sure that you are contesting all unemployment claims in an accurate and timely manner. When claims are sent back to the state late, usually the employer will be penalized and will lose the opportunity to protest charges to their account. In order to win an unemployment claim, you must submit accurate information that is both informative and concrete, documentation is a must. By winning a claim, you will effectively block your account from being charged with unemployment benefits. This does not necessarily mean that a claimant will not get paid, it just means that the payment will not be charged to your business.

The next and most effective way to reduce the charges is to audit the charges on the benefit charge statement! This sounds like a no-brainer, however almost no-one does it! There are a few things that need to be audited on these forms – the people that are collecting, and the actual dollar amount that is being collected. The government isn’t anywhere near perfect, and they make mistakes all the time. Check out the overpayment rate in your state. Some states are over 40% in overpayments! This means that if someone is supposed to collect $10,000 from you account, they are actually getting paid $14,000. Your tax rate will skyrocket if these benefit charges are not controlled!

In conclusion, benefit charges are the most important piece of the unemployment puzzle. The amount of money being paid out of your reserve account directly affects the tax rate that you will be issued. Auditing these charges is critical and can be very cumbersome without the right tools to do it.

At Dunn Corporate Resources, our cutting edge computer system, utilizing the federal SIDES System, tracks the exact amount of benefit charges on each claim to ensure that there are no errors. And if someone is being overpaid, we automatically protest those charges and ensure that the money is credited back to the employer’s account. Contact us today if you’d like your UI account reviewed, or would like a demo of our software!