Do employers pay more when a former employee collects unemployment?

Good question. I don’t understand it either. When the sandwhich shop I worked at closed down, I collected UI. And I’m in California. My boss who had to close the shop also filed. So in that sense his shop definitely wasn’t paying for our UI. When one reports UI claims they take the a quarters work of how long you worked there and average your pay from that. For instance my last 4 months I averaged about 460 per two weeks, my UI gave me about 240 every two weeks. I’m interested in the final answer to your question.

The simple answer is yes, this is usually the case in most states. Employers can potentially pay more if unemployment claims are higher among employees dismissed from that firm.

Employers are rated according to past history. If they have a history of laying off many employees, then they pay higher UI rates. If they never lay anyone off, they have low rates. When an employer lays someone off, their rates will often go up, especially if they have not laid anyone off in a long time.

On the benefit side, I need to correct your understanding, as well. Benefits are fixed based on the employee’s former salary, not on how much the employer paid in. There are rules as to how long the benefit can be paid for, and that may have something to do with how long the employee has worked. However, I believe that once you have worked a sufficient period of time—six months, perhaps, you are entitled to full benefits.

Usually the benefit is for six months, but in hard times, the Federal government extends the benefit up to several years, in times like these. The government pays for this, however. I do not believe employer premiums are raised when the government extends the benefit.

The moral hazard is that the employer and employee will collude. The employer will hire for six months, enabling the employee to get six months of benefits. Then the employee is hired back for another round. This is why the UI premiums go up when you lay someone off, to try to discourage employers from gaming the system that way. We want to make sure all layoffs are honest ones, not that employers and employees are colluding to rip off the taxpayer.

Thanks everyone!

The Californian employer I was talking to thought that since he had only a few employees, but one made a lot more money than the others, that if the expensive one was dismissed, he might collect as much UI as possible, and he thought he would need to match the payments collected. Maybe California has such a system.

Employees don’t pay UC. It is paid by the employer with the exception of I believe it is three states. The amount the employees in these states pay is miniscule. The tax rate for the employer is determined by state and federal laws. The employers rate changes based on formulas that take into account something called unemployment insurance experience.

The “government” which means we, the people, taxpayers must be reimbursed for the emergency extensions that were put into place recently with the horrific downturn in the economy. Many states are already determining how much their unemployment insurance rates, monies paid by the employers, must be increased to pay back the emergency UC loans.

Here is everything you wanted to know about the program and wished you hadn’t asked. LOL

Thanks bkcunningham!