Updated July 8, 2015
How do unemployment claims affect an employer?
Who is responsible for unemployment taxes, once an ex-employee has filed a claim?
How will this affect my business?
When an ex-employee files for unemployment compensation in The State of Illinois, they will list their last or most recent employer on the forms. Only the last employer who has employed this person for over 30 “working” days is responsible for this person’s unemployment compensation. If a company employs someone that works for only 29 “working” days, then they are not responsible.
A working day is considered an eight hour day. So if you have a part time employee, the total hours worked must add up to thirty days at eight hours apiece or a total of more than 240 hours. If they have not worked for you for that amount of time, then you are not the last chargeable employer. But you have to be able to prove this assertion. Time cards and payroll records are essential.
An employer is automatically given a percentage rate for unemployment compensation upon the start up of their business. Once a former employee begins to collect unemployment, the department will re-adjust the tax rate based upon the unemployment payments. For example, if your company does not have any unemployment claims paid, then the percentage rate will very possibly go down and you will pay less in tax. But, if you have former employees being paid unemployment, then your percentage rate for this tax will probably increase. Think of unemployment as insurance. If you have substantial claims on an insurance policy, your rates will probably increase.
Most state employment funds are unabashedly anti-employer. They exist to pay ex-employees benefits rather than to save money for employers. It is very difficult if not impossible in most cases to fight claims. Solid irrefutable payroll records can certainly help.
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Chris Amundson is the President of Accounting Solutions Ltd., a full service public accounting firm of Certified Public Accountants and Enrolled Agents handling the bookkeeping, accounting, tax preparation, and audit representation needs of Businesses, Estates, Trusts, and Upper Income Individuals.