Why Don’t Employees Pay for Unemployment Insurance?
January 13, 2009 by Mr. ToughMoneyLove
Filed under Insurance, Taxes
Before you start calling me bad names, let me assure you that even Mr. ToughMoneyLove has sympathy for the unemployed. I am so grateful that I am not one of them. For any of you out there looking for a job in this awful economy, I truly hope you find one ASAP. Just don’t assume that President Obama will dump one in your lap anytime soon. (That’s a story for another day.)
It’s not that I don’t want the unemployed to have some income when they can’t find a job. It’s that I’m not sure that the system we have in place to finance unemployment benefits is a good one.
First, a little review. The unemployment insurance system is jointly operated by the state and federal governments. It is financed by state and federal payroll taxes. Under the Federal Unemployment Tax Act (FUTA), the federal tax rate is 6.2% of taxable wages applied to the first $7,000 of income. Most of the federal payroll tax can be offset by state unemployment taxes, which vary from state to state, as do the benefits. All of the state and federal unemployment insurance payroll taxes are paid by the employer. This is the part that I question.
I am part owner of a small business and have some familiarity with the unemployment insurance system. For one thing, the state payroll taxes in many states are experience rated. This means that if an employer has an ex-employee claim and receive benefits, unemployment taxes go up. This creates incentives for employers to fight unemployment claims made by employees who quit or who are fired because they do a lousy job or suffer from frequent bouts of the Napa Valley flu a/k/a recurrent hangover disease. (Yes, we had one of those working for us for a while.) The problem is that to fight a claim, you could end up having to appear in front of a state hearing officer or administrative law judge for a mini-trial, etc. That’s usually more trouble than it’s worth. I actually represented our business at one of those hearings. Without going into detail about the testimony from the former employee, the word “fabrication” sticks prominently in my mind.
Now let’s say you are a small business in Massachusetts, which is relatively generous in its benefits. (No surprise there – it’s the ancestral home of the Kennedy clan as well as dear Barney Frank.) The unemployment tax rate in Massachusetts can go as high as 10.3% and the weekly benefit can be as much as $900 (if you have lots of dependent children). I don’t know about you, but I could do OK for a while on $900/week tax deferred. We have had a few employees go through the same analysis with not so generous benefits. Quitting (or forcing a termination) and claiming unemployment is sort of like a mini-vacation to them. You can tell when that happens because a new job suddenly materializes only when their unemployment benefits run out. Meanwhile, our tax rate goes up.
So why don’t employees pay unemployment insurance premiums? Is it fair that employers carry all of the risk even when some employees can obtain benefits by quitting or getting fired? When employers are forced by economic conditions to reduce payroll, whose fault is that? And when Congress decides to extend enemployment benefits (like it has been doing serially in recent months), we are all paying for that with our tax dollars because there are not enough employer-financed premiums in the system.
I think maybe we should treat unemployment insurance taxes like the Social Security payroll tax but with a twist. Employers and employees each contribute, just as they do for Social Security. That way, they share the risk. The twist is that some of the unemployment payroll taxes are credited to the employee’s personal account. If the employee and employer do well and no one loses their job, perhaps some of the unemployment insurance taxes can be invested and returned to the employee as an extra retirement benefit. That creates a positive incentive for all employees to work hard and stay employed.
FUTA has been around since 1935. The tax rates and wage base hae been tweaked but not much else has changed since then. I’m not an actuary so I might be overlooking some critical factor in my analysis. Maybe someone can explain to me why the present system of financing unemployment benefits is the only one that works. Considering that the government designed the system to begin with, I doubt it.
How about it readers? Do you think change is needed?
Image credit: Ayhan YILDIZ
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I would like to make a few points here. First of all you said that you could live on $900/wk tax free. While most people wouldn’t mind that at all, it is not tax free income. You have to pay taxes on it at the time you receive the benefits or at the end of the tax year. Secondly, if someone quits their job they do not qualify for unemployment so that “mini-vacation” is cut short by not having electricity or water when you don’t pay the bills. Lastly, you are speaking under the assumption that all unemployment is due to a lazy worker. Unemployment was created for a reason, to protect the financial well being of people when they are out of work for a limited amount of time. What happens when an employer fires a person because the company wasn’t smart with their own money and it’s time to downsize, or when the economy effects as many businesses as it is right now. Also, let’s not forget that many small business owners simply don’t report correct amounts or at all? It’s not an issue until down the road, and that hurts the rest of the pool. I’m not saying that it’s one side’s responsibility over the other. I’ve been a fan of your blog for a few months now and recommend it to others, but now and then you need to step back and look at both sides of the situation.
PS – The items I touched on were based on the laws in my state, could be completely different elsewhere.
I have a question can we sue the state and federal government levels to get out unemployment money back. I am sick of backing a horse that supports people not working and getting paid to do it. It is sickening that I pay my hard earned money to some person who is going to use what ever cash they get to buy 40’s, lottery tickets, cigarettes and dutch’s. If you collect a check you should be subjected to drug testing and should be forced to put what ever cash you have into savings. I’m a kid right of college paying student loans and bills like many other hard working American’s and I am fed up with bailing out the weathly and the poor. GIVE ME MY MONEY BACK. Hey write me an email I bet we can grow some legs with this.
“I have a question can we sue the state and federal government levels to get out unemployment money back. I am sick of backing a horse that supports people not working and getting paid to do it. It is sickening that I pay my hard earned money to some person who is going to use what ever cash they get to buy 40’s, lottery tickets, cigarettes and dutch’s.”
not sure if you know this, ui is not exclusively paid for by the federal gov’t. it is largely funded by ui taxes that are paid for by the business owners. the fed gov’t usually only gets involved for ui extensions (which are not common) or will *lend* money to the state if the state runs out of money (like what has recently happened in ohio, for example). so you can stop complaining about your “hard earned money” being thrown away to ui when, more than likely, next to none of your paycheck goes into supporting it.
“If you collect a check you should be subjected to drug testing and should be forced to put what ever cash you have into savings.”
ok, so who would actually fund the drug testing? do you want to anger the business owners even more than they already are by adding that cost to the ui tax they already pay? or perhaps you, the one who loves taxes so much, would like to be the one to support that? moving on, your savings account idea is just ludicrous. the whole point of ui is to indemnify an employee for monetary loss as a result of being *unjustly* discharged from a job, so how are they going to pay their bills if all their money is being put into savings? why don’t you put 100% of your income into a savings account for a few months straight and see how well you do.
“I’m a kid right of college paying student loans and bills like many other hard working American’s and I am fed up with bailing out the weathly and the poor. GIVE ME MY MONEY BACK. Hey write me an email I bet we can grow some legs with this.”
well, i think this answers any of our questions right here. “kid right out of college” typically equates to “wet behind the ears” and your post clearly demonstrates that. give you your money back? what happens to your whole argument the moment you realize that next to none of your money is being taken from you in the first place? and what’s this “bailing out” business? since when did ui become a “bail out”? no one is being bailed out of anything, college kid.
Wow I had no idea that’s how it worked in the US. I have to admit, as an employee, my first thought is: “That would be sweet!”. In Canada, the employment insurance system is funded by employees.
Tying some contributions to the individual employee would be good. But the top-level claim of “why don’t employees pay the tax” is just nonsense. It’s the same cost to the employer per worker whether the amount gets reported on the employee salary statement or not.
Unless you’re proposing that the government should halve the tax against companies and make up the difference with a tax on employees, and that companies WOULDN’T increase salaries to compensate. In which case, they could just decrease salaries by that amount right now and achieve the same end goal. Either you’re advocating decreasing salaries, or the money’s going to come from the corporation anyway. It’s just a question of whether it goes through the employee first, and I don’t see that it makes any difference at all.
Bret: Thanks and good catch on the taxable income issue. My mistake – I should have clarified that you will likely owe taxes at the end of the year. Most states do not withhold taxes from benefit checks.
Also, there are people who quit and claim benefits on the legal theory that they had “good cause” to quit. As lame as that sounds, it works in some states and many employers don’t bother to fight it.
I did not mean to suggest that most people are unemployed because they are lazy. I’m just trying to find a better way to use the money and create beneficial incentives for both employees and employers.
Melanie: Interesting difference in Canada. How much do employees pay?
TMN: What I am advocating is shifting part of the burden of unemployment insurance to employees for two reasons: (1) to create disincentives to quit and claim benefits just to get a break from working (I know people who have done this) and (2) to create a supplemental savings/retirement plan for the employee using the premiums paid. There is no question it would have to be phased in slowly but why not? Unions do this by using mandatory dues to create a strike benefit fund. Same principle except that the unions never return the money if it isn’t used.
Okay… but I’m saying the burden is already entirely on the employees. Unemployment tax is part of the cost of employing someone. If that cost is too high, no job for them, because you can be damn sure no company will employ someone unless they can generate more money than they cost.
So of an employee’s entire cost to a company, there’s salary, and there’s costs and taxes that are unseen by the employee. It sounds like what you’re proposing is to remove some of the taxes from the company and impose them on the employee instead. There are two ways a company can react to this:
-raise salaries to compensate (cost of employment stays the same, effective salary after taxes stays the same)
-leave salaries where they are (cost of employment goes down, effective salary after taxes goes down)
In the first case, it seems to make no actual difference since the company has the same cost. Sure, you have more in your salary, but it’s immediately taken away in taxes. In the second case, you’re basically talking about a salary cut across the board, except you’re hiding it by shuffling taxes around.
TMN: The argument you make can be applied to any employee benefit, including pension costs and health insurance. But that’s not how most employees look at it. If you suddenly told employees that they had to pay 100% of their own health insurance but that their salary would increase to pay for it, most would still be upset. We’ve seen this with HSA accounts – even though we fund the high deductible, the employees freak out because more of the risk is placed on them. They don’t like being asked to be a wise consumer of health services. Also, if the employee bears some of the risk of being unemployed then chooses to use the benefit, their premium goes up, just as it can with other types of risk insurance. If they don’t use the benefit, a part of the premium they paid is returned to them in retirement, plus investment earnings. What’s wrong with that?
The problem is I can’t tell whether you’re advocating for or against raising salaries to compensate (the 1st scenario in my earlier reply). If you’re for it, then I’m tentatively with you. In general I’m against hiding employee compensation in employer taxes, because like you said, some people don’t think about it.
Another problem in actually implementing this, though, is to get employers to follow through on raising salaries commensurate with the decrease in taxes. I strongly suspect many of them would try to hold back on it as a cost saving measure, ending up with employees getting less when they were supposed to get the same but with more transparency.
Further, I still don’t like the initial claim that “employers pay this tax”. In a very real sense the cost DOES come out of employee salary (well, salary + benefits + costs, assuming these equal a set value when one changes). Just because it’s hidden when the monthly checks get cut doesn’t mean they aren’t paying it.
If you’re just advocating for more transparency in these costs that makes sense, but that didn’t seem to be the intent of the original article.
Like all costs of labor, the unemployment tax really comes out of the employee’s pocket. If the employer didn’t have to pay it, they could pay employees more.
Under the current plan, employers who constantly lay off workers pay higher taxes. Employers who only fire workers “for cause” pay lower taxes.
A little too much tough love here. When you say, “That creates a positive incentive for all employees to work hard and stay employed.” you assume that people don’t have much of an incentive to stay employed under the current system. I beg to differ. The very large majority of Americans want a job and earn an honest living. They don’t want to sit around in an idle manner. Maybe you know a different group of people, but I am pretty sure that at least 95% of the people I know fall into the always-willing-to-work group.
I was talking with a friend in Jersey and he explained the Unemployment System in the US and I was a bit shocked.
Seems a bit onerous on employers.
Here in Canada, every employer pays the same, and while they do have to match premiums, it’s not experience rated.
Employees pay 1.73% to a yearly max of 711.03. I wasn’t aware that employers paid at all (I’m ashamed to say) but I did a search to come up with the numbers and it turns out that they pay 1.4 times what we do.
As an employer, I’ve gotten to see the other side of the unemployment issue. I have an employee who calls in sick chronically, does a lousy job, complains, is disrespectful AND has repeatedly said “just let me go so I can collect unemployment”. Why should this person be entitled to a handout from me?? We live in a semi-communist society.
Chris: have you been documenting these cases? Typically if an employee is incompetent and violating company policies, which seems to apply in your case, their claim for unemployment benefits will be rejected. As long as you have documentation on these problems you’re likely to win in any dispute.
Don’t just take his word for it when he asks you to fire him. And don’t complain about the laws in this country when you appear to not understand them in the first place.
@Chris: Can’t you just fire him? Does unemployment insurance in the US extend to being fired?
Ah, I just read the comment above. Apparently, it’s the same in the US. In Canada, there is a box in the Record of Employment for “reason for leaving”. If you fill in “fired” then presto: No unemployment for your deadbeat employee. As TMN says, though, be sure to have good documentation, in case he tries to sue for wrongful termination (Some people will work really hard at trying to find a way to avoid work.)
Don’t forget the “stealth layoff”, made popular by Computer Associates and emmulated by many.
That’s where an employee is called into HR out of the blue, given a poor review and summarily dismissed for poor work. But now they are dismissed for cause so they don’t qualify for UEI.
Gotta love it.
I agree that some employees want to get fired because they would rather draw unemployment. I have had more than my share. I even live in a free will state where laws say I can fire someone for no reason at all. But, they can file for unemployment so I don’t quite understand the reason for the “free will” part if they can file. I still have to fight it if they file for unemployment. I still have to document everything and wait and fire for good reasons or they can file unemployment and I have to pay. It’s not a fair system because some employees know how to work the system and just want to “draw.”
This is true to a point but alot of companies seem to go out of their way to underpay their employees which makes these deadbeats not want to work or perform at a poor level. You get what you pay for!
In addition to not being able to receive $900 a week unemployment compensation in Massachusetts it also IS NOT TAX FREE and is taxed as income, which makes little sense. Again, please check your facts before posting. Thanks.
Mike
MR. Toughlove,
I work for a staffing firm in NYC. We just went to court to contest giving unemployment benefits to a temp who showed up late often and was let go even though others at the client firm kept their jobs. We even have a database that logs in this information on lateness. The judgement came in today after the court hearing where we had to show up but the temp, living several states away (who called in on the phone at the hearing) and the temp won. He lied to the judge that we never warned him of his lateness (its in our database when he was called). Even with good evidence against a claim, NY always seems to side with the temp. The judge’s reason for siding with the temp is that there were layoffs. As I said, others kept their jobs at this firm. Why would a business move to NY when the deck is always stacked against them????? Remember this when NYC ends up having no tax base since all the businesses move out.
There are three states where employees pay into UI directly. I’m researching the subject at the moment, so I haven’t found them, but if you go to the Employer Information on UC Law page, Unemployment Compensation section of http://www.dol.gov, you’ll see that it notes 3 states that have it right – employees pay in the same way we independent contractors pay in for ourselves.
I found the page doing research on my state’s rules (Florida). The page address is: http://dot.myflorida.com/dor/uc/GT-800058.html#what_Taxes >> Employer Information on UC Law.
Great article, by the way. I write on your subject (Careers & Workplace Issues) for the Examiner.com, Jacksonville, FL, edition. My pieces are a bit more national than local, though.
Keep writing! I love what you have.
d.
I searched this question and found this thread. As a small business owner I believe that an employee should pay for the unemployment insurance, after all it benefits them and only them. I do understand that there are alot of bad businesses that may treat employees bad, I don’t believe that argument substantiates why an employer should be forced by law to provide and pay 100% of unemployment insurance and than be penalized when an employee collects.
Unemployment insurance in which the state and federal government force employers to pay is simply another entitlement that is abused by most. I have had many employees who I know worked and performed their duties great up until the time they were sure their unemployment benefits were available and than let their performance slide in order to get terminated. Even terminated, they have a slight time period penalty before getting their benefits.
I am a good employer. I take care of all my people by offering above average wages and paid benefits including 100% paid health. I could afford to employ more people if the government would get out of the way and stop stealing from my business. One way is if employees were responsible for paying for their own unemployment insurance.
One last thought. there are alot of people who work hard, are responsible and consistently do the right thing but there are also many people who don’t want to work, are lazy and only interested in what others will give them, namely the local, state and federal government. I think it is time that the government stop penalizing us for working hard and doing the right thing and stop rewarding those who choose unemployment and laziness as a way of life with entitlement we must pay for. Thanks for letting me speak my mind. jack
I have worked my entire life – from the age of 15 until March 2008 when I was laid off. I haven’t EVER drawn UI until now. I am 52 years old – so I have been working for a while. I am SICK of hearing people say that, “Anyone that wants a job can have one – they just aren’t trying.” Let’s see how THAT story changes when they become unemployed. I would GLADLY give up my UI check for a JOB! I have always done the “right” thing. I didn’t get a bailout like AIG, auto manufacturers, banks, etc. They were all living the high life and really don’t give a shit about anyone or anything – except their big bonuses (THAT WERE NOT DESERVED IN THE FIRST PLACE). AND if I were not receiving the UI checks bi-weekly I would be filing bankruptcy – thus, more debt dumped on creditors that would want a or another bailout. I have (soon to be had…) excellent credit and have always paid my bills on time. Not everyone wants to sit on their ass every day and watch tv.
Karen,
I understand completely, your point. However, my point is that employees should have to pay for unemployment insurance. Lets take you for example. You’ve worked hard all your life and now find yourself in need of unemployment benefits.
I believe someone like you having paid for the insurance for so long should be able to collect without for as long as it takes until you find another job to your satisfaction. What I believe is that the unemployment benefits should be relative to the time spent paying into it.
My experience and I believe alot of other business owners has been that alot of people are very familiar with how the system works and they take advantage of it. Many work long enough to build up benefits and than work it so they get laid off or fired so they can collect for a bit of a vacation. Even if they get penalized for getting fired, it is only a brief time period.
Further more, when they collect, the unemployment insurance premium for the business owner increases.
My point is that the insurance benefits the employee not the employer, so the employee should pay for it!
As for AIG and the banks. There is no business failure insurance that I can purchase. I f i run my business to the ground and make bad decisions, I lose everything. I get no bailout and I shouldn’t, neither should they!
Failure should never be rewarded!
Government systems and entitlements if they are necessary, should benefit those like yourself who have worked hard and done the right thing all their lives. Unfortunately, they don’t!
Best wishes and good luck to you! Jack
I totally agree with you that employees should pay their part AND I believe that the employers should be able to draw UI just like everyone else. The only problem about the individual account is this: It would end up like social security – where the government has already taken your money and used it for someone or something else (and then usually wants to raise taxes to replace the money they have used). It is extremely disappointing to me, however, that so many of the companies that I worked for in the past have gone “belly up.” That also makes it difficult for any potential new employers to check my references. I honestly feel like someone has flipped a switch and decided that I can’t work anymore. I feel that I will never live the “middle-class” lifestyle that I once had. I have absolutely nothing!
ui is not a scam and it is certainly not a “benefit”. ui claimants whom refer to it as a benefit are just using the colloquialized terminology. opponents of ui use the term in order to propagate its meaning to infamy so they can use it to perpetually call out the system for its corruptness. news flash: there is no perfect system. there are always those whom find work-arounds for any system and justice isn’t always served. if you opened your business thinking you could have it your way and your way only then you’re sadly mistaken. everything has its ugly side, and ui is one of the many ugly sides of owning a business. deal with it.
ui is designed to protect employees from terminations deemed unjust in connection with work. you hired me under a set of pretenses, the main pretense being that i perform the tasks required as stated by the written job requirements you presented to me. now understand the facts: you can fire anyone you want for any *lawful* reason you want, but if i perform my duties as stated and you terminate my employment because you can no longer afford to pay me or simply because you don’t like the color of my slacks, you are liable for paying my ui until i can find new work.
now we come to those awful freeloaders whom live for nothing more than to sap the system dry. you can’t expect infallible protection from these people. they do exist and will be a tumor on our society for as long as we have a society. the only one who can protect themselves from these wastes of life is YOU. you can start by avoiding making irresponsible business decisions that will result in you needlessly having to jettison an employee into the murky waters of unemployment. develop a foundation of iron-clad company regulations that must be followed. issue written warnings and write-ups your problem employees and make sure a WITNESS is always present in the event of a hearing.
just because you are the business owner does not mean you are in complete control. i know you wish it were that way, but it is not. therefore, you have one of two choices: sell your business and work for the man just like the rest of us OR operate your entire business yourself without ANY employees and alleviate yourself of 100% of the risk. what? you need employees in order for your business to function? well, then, looks like you better start putting together the aforementioned “iron-clad” set of regulations. otherwise, see you at the hearing!
You sound like one of those people WHOM hates businesses and WHOM hates working for the man yourself. Try running your own business and you might have some sympathy for those WHOM have actually done so. Or maybe you have? I can’t tell what your stance is or where you’re going with this.
First you say, “avoid making irresponsible business decisions that will result in you needlessly having to jettison an employee into the murky waters of unemployment…develop a foundation of iron-clad company regulations…etc.” Then you say “just because you are the business owner does not mean you are in complete control.” Sounds like a contradiction to me. Is it because you’re indecisive that you seem so worked up?
who = nominative
whom = objective
hey, thanks for the who/whom lesson! it’s one of those grammer rules that’s been snagging me throughout my whole life. i’m usually the first guy to call someone out for not knowing the difference between your/you’re, there/their/they’re, and then/than, but that pesky who/whom trips me up every time!
“You sound like one of those people WHOM hates businesses and WHOM hates working for the man yourself. Try running your own business and you might have some sympathy for those WHOM have actually done so. Or maybe you have? I can’t tell what your stance is or where you’re going with this.”
i don’t know where you got this idea. i have zero problems with businesses/business owners or being an employee myself. in fact, if you read my other posts, you will see that i actually give business owners advice on how to properly terminate employees in such a way that presents the least amount of risk for a ui payout. in spite of that, however, i will add that i don’t have sympathy for the struggles business owners go through, especially with respect to ui. no body of authority appoints a person to become the owner of a business against their will. owning a business is 100% voluntary, comes with responsibility, and risks are always present. one who does not set the proper expectation as to what being a business owner entails deserves no sympathy when poor or inexperienced business planning comes back around to take a bite out of their backside.
“First you say, “avoid making irresponsible business decisions that will result in you needlessly having to jettison an employee into the murky waters of unemployment…develop a foundation of iron-clad company regulations…etc.” Then you say “just because you are the business owner does not mean you are in complete control.” Sounds like a contradiction to me.”
would you care to illustrate how the second sentence contradicts the first or vice-versa?
“Is it because you’re indecisive that you seem so worked up?”
the only person who seems worked up here is you. your digressive who/whom tangent is certainly indicative of this.
I’m not worked up, and I’m sorry that I thought you were. I just got that impression because your post seemed hurried (the who/whom thing, no capital letters) and it seemed like you were bashing both sides. I misread your tone, but that’s what it seemed like. I agree that owning a business is voluntary, risky, and a huge responsibility, and that one should not take it on if unprepared. But most employees have no idea how much easier it usually is to be on the employee side of the business. I think good employers deserve more recognition than they’re usually given.
As for the contradictory statement, here’s what I meant: “avoid making irresponsible business decisions that will result in you needlessly having to jettison an employee into the murky waters of unemployment…develop a foundation of iron-clad company regulations…etc” sounds like there is never an excuse or reason to have to terminate an employee, unless you’ve been irresponsible. By further stating that “just because you are the business owner does not mean you are in complete control”, you admit that some things may not be completely within your control, so a situation could arise where you may have to let an employee go even though you have been responsible.
I apologize for the who/whom comment. I was being sarcastic, but I meant no malice.
“I’m not worked up, and I’m sorry that I thought you were. I just got that impression because your post seemed hurried (the who/whom thing, no capital letters) and it seemed like you were bashing both sides. I misread your tone, but that’s what it seemed like.”
it’s all good then. i never use proper caps in informal internet communications, but i do try my best to adhere to proper grammar protocol.
“I agree that owning a business is voluntary, risky, and a huge responsibility, and that one should not take it on if unprepared. But most employees have no idea how much easier it usually is to be on the employee side of the business. I think good employers deserve more recognition than they’re usually given.”
i totally agree that it’s a much simpler life on the employee’s side of the fence. all we have to do is go to work and process a W2 at the end of the year. however, it’s a person’s choice to start a business. that, in and of itself, in my opinion, isn’t enough to warrant any additional respect and/or recognition. we all make choices and deserve no special pat on the back for them.
“As for the contradictory statement, here’s what I meant: “avoid making irresponsible business decisions that will result in you needlessly having to jettison an employee into the murky waters of unemployment…develop a foundation of iron-clad company regulations…etc” sounds like there is never an excuse or reason to have to terminate an employee, unless you’ve been irresponsible. By further stating that “just because you are the business owner does not mean you are in complete control”, you admit that some things may not be completely within your control, so a situation could arise where you may have to let an employee go even though you have been responsible.”
when i said “just because you are the business owner does not mean you are in complete control”, i was addressing how business owners don’t have total reign over the determination process. this means they can’t fire an employee for wearing pink socks and not be accountable for their actions, hence they are not in “complete control”.
however, when i said “avoid making irresponsible business decisions that will result in you needlessly having to jettison an employee into the murky waters of unemployment” and blah blah, i never even addressed the issue of control. all i did was offer my own brand of advice on how to tighten up your company policy to reduce the risk of being on the hook for ui compensation. i never presented it with any guarantees. it was just advice that many small-time business owners need to heed.
I’m not sure who should pay but every working person should be allowed benefits if they are unemployed and actively seeking employment . I’ve never collected unemployment but after being out full-time work for 6+ months, i had to apply. Well my previous employer didn’t pay unemployment tax so i cannot collect benefits. It sucks.
lul,
I must say that I agree with you and you help to make my point.
“ui is designed to protect employees from terminations deemed unjust in connection with work.”
I know and understand why UI was created and designed to do. My point is that as you state, it is designed to protect the employee!! So my point is that the employee should cover the cost. We as a society buy insurance and in alot of cases are forced to buy insurance on a whole variety of things, i.e., car, home, life etc.We buy theses insurance plans to protect us.We benefit from the money we spend because it protects us!
UI is an insurance plan that we as employers are forced to buy on behalf of the employee and when that employee collects our rates go up costing company’s more and more.
Also, here in Maryland, the unemployment division very rarely decides in favor of the employer no matter how well your documentation is.
I will state once again that I believe that UI has a purpose and that purpose is to protect employees and therefore, the cost should be absorbed by the employee by way of a state deduction from there paycheck with the cost being relative to the amount of times they have collected over the course of their time in the workforce. A good example would be Karen. She has worked many years and never collected so her cost would be very low and she would be entitled to a longer length of benefits where someone who collects often who had a bad work history would have to pay more.
Jack
Hi TML,
One of my employees advised me that they want to “Move on” from her job. She says she wants to take a job in May but will stay at the job as long as we need her. We don’t “need” her because we have WIKI procedures to train employees. We hired her at a time when the economy was better but now we can get an employee to do the same job for less money. We keep her working because she hadn’t not done anything to get fired. She asked us to fire her so that she can get unemployment. My partner is considering it because he wants to fire her anyway because of the salary. However, I am concerned that our UI rates will go up if this happens and I don’t think it is fair for her to put us in this position. If she wants to quit she should quit without mooching off of us. If she wanted to get fired, she would do something to get fired which wouldn’t qualify her for UI. Please help my sap of a husband with your knowledge.
Thanks
i find your ethics to be somewhat deplorable. you’re essentially saying this: “we hired her when the job market was steady and fruitful. now that the job market sucks and people are desperate for work, we can exploit their strife by offering them a lower salary since we know they can’t afford to turn it down!”
then you have the gall to say this:
“I don’t think it is fair for her to put us in this position”
it seems to me that you have a double standard when it comes to what’s fair. you are willing to low-ball the salaries of desperate working-class citizens in order to save a buck, yet an employee who works for you is being unfair by not quitting?
so it’s obvious that the current economic condition has created an advantage for you, but you don’t have any constitutional rights to capitalize on it. that said, you need to stop pointing the blame elsewhere and focus moving forward with the situation at hand. first and foremost, you need to realize that it was your company’s decision to hire her. the fact that you don’t need her now does not entitle you to a bailout that grants an accountability-free license to terminate her employment without just cause. second, you need to drop any grievances you have with hiring her at higher salary pre-recession than what the average joe will work for post-recession. there’s always someone willing to work for less. that’s just business life. no insurance policy exists to cover you for financial hardship every time you fail to pull the lowest bidder from the crowd of job-hungry people. lastly, so what if she wants you to fire her? is she doing her job properly while she’s there? is she coming in to work on time? if so, pay her and stop complaining that things aren’t going your way bcuz, lady, in life, hardly anything goes your way.
“We as a society buy insurance and in alot of cases are forced to buy insurance on a whole variety of things, i.e., car, home, life etc.We buy theses insurance plans to protect us.We benefit from the money we spend because it protects us!”
you’re trying too hard to compare ui to other forms of insurance. the purpose of the insurances you mentioned is to protect the insured from unexpected and uncoordinated disasters that result in monetary losses (“loss” is a key word here, as well as “arbitrary” which i will use later). there is no appointed, deciding body behind a natural disater or a death of a person, nor is there anything whatsoever arbitrary in nature to any of the losses covered by any of those insurance policies. this is unlike employment, however, where the owner of the business is the only entity ultimately responsible for and capable of the arbitrary termination of an employee against their will. comparing ui to other forms of insurance by virtue of the fact that “it protects the individual” is just fallacious.
this is why i think ui should be paid for by the business owners. you hired me. you fired me. therefore, you are the direct cause of any monetary losses that resulted from my terminated employment. this is not comparable to some random earthquake that destroys my house or heart attack that causes me to keel over and die. that said, it doesn’t make sense that i should have to buy an insurance policy that will compensate me for monetary losses in the event that you make the arbitrary decision to terminate my employment for unjust cause in connection with work.
If employers had no stake in unemployment, they would be much more likely to mass lay off “uppity” workers who were demanding silly things like decent treatment or safer working conditions. If you read about the big monopolies of the 19th century, a work shutdown (which in this projected situation would force employees to live on the benefits THEY had paid in, and had no financial downside for the employer) would be all it would take to keep ‘em hungry, quiet and subservient to the whims of the employer. You may be a good employer, but as someone who has worked with employers for years, collecting those taxes, I can honestly say that most small employers feel that people really should work for them for free, as it will surely be when we all get to heaven!
i agree wholeheartedly. if the employees were to fund ui, the employer would have zero interest in contesting the claim, nor an interest in using sound judgment when it comes to discharging an employee. why would they have any such interests when it would be the employee’s rate that would be subject to the increase? this means you would be able to screw your employees over even more! develop a conflict of interest with an employee and fire them for wearing pink socks! then sit back with a smug smile as you imagine the sour expression on their face when they see that their ui rate has increased. take that, employee!
so i think it’s reasonable to say that ui maintains balance. bcuz of ui, an employer now thinks twice before discharging employees for frivolous reasons. this just wouldn’t work if the employees were to fund ui. after all, how much sense does it make for an employee to say, “i better think twice before getting fired for no legitimate reason whatsoever!”