One claim, several years.

When a former employee collects unemployment benefits, the money does not come out of nowhere. In most states, the benefits paid are charged to the employer's account, and those charges feed into the employer's state unemployment tax rate. That is why a single claim can show up in your costs long after the employee has moved on.

Benefit charges

If the claimant worked only for you during the state's base period, your account usually carries the full charge. If they worked for several employers, the charge is often split in proportion to the wages each employer paid. The state then sends you a statement of the charges.

Experience rating

Once a business has been around long enough, the state stops using a flat new employer rate and gives it an experience rate. Each state has its own formula, but most compare the benefits charged to your account against your taxable payroll over a period of several years. Minnesota, for example, uses the last four years. Rhode Island uses a three year payroll average.

Because the formula looks back over several years, one approved claim can raise your rate in more than one year.

Example only: a claim charged to your account this year may still be inside the lookback period when next year's rate and the year after are calculated.

Why the response matters

The state decides whether to approve a claim, and whether to charge your account, based on what it knows about the separation. If you do not respond to the claim notice, it decides on the claimant's account alone. Some states also relieve an employer's account of charges in certain situations, but only if the facts are on record.

What employers can do

• Respond to every claim notice before the deadline, with accurate facts and dates.
• Contest only the claims that should be contested. A layoff usually qualifies, and that is fine.
• Check the benefit charge statements the state sends you, and question charges that look wrong.
• Read your yearly rate notice instead of filing it away.

Zenmul prepares unemployment claim responses with a clear verdict on whether the claim is worth contesting. You submit the response yourself.

This article is general information, not legal or tax advice. Rules differ by state.