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This is a guest post written for Maryland Chamber members by Ron Adler, President and CEO of Laurdan Associates and Chair of the Maryland Chamber Unemployement Insurance Subcommittee. For more information, contact Ronald Adler, president-CEO, Laurdan Associates, Inc. at (301) 299-4117 or radler@laurdan.com.

Maryland employers will soon receive their 2011 unemployment insurance (UI) tax rate notices. Once again tax rates will range from 2.2% ($187 per employee) to 13.5% ($1,147.50 per employee). The 2011 new employer rate—except for new construction employers headquartered in another state who will be assigned a rate of 13.3%–will be 2.6%. NOTE: Employers who want information about their tax rate before the receipt of their tax rate notice may call 1-800-492-5524 and enter “16.”

While there will be no change in the 2011 tax rate or the per employee tax liability for employers that continued to be assigned either the minimum or maximum tax rates, most other Maryland employers are likely to experience significantly higher tax rates as the full effect of the recession impacts tax rate calculations. NOTE: For small and medium employers, two or three UI claims can increase tax liability by more than 200 percent.

With less than seven months remaining to influence their 2012 tax rates, employers need to review management activities to ensure the effectiveness of their UI cost controls. Four specific areas should be addressed.

1) Job descriptions and performance. In response to the recession, organizations have redefined their business objectives and goals, reengineered their workplace, downsized, and introduced new technology and methods. This has changed how jobs are performed and the required performance standards. Your organization should ensure that its job descriptions and performance standards reflect current jobs, not the jobs that used to be performed, and ensure that this new information is used in hiring decisions. Remember liability for UI claims starts at the time of hire—not when the employee is fired. If you hire an employee, who is unable to perform the job or does not meet your performance standards and you terminate that employee, your account will be charged for any benefits collected.

2) Performance management. Performance management plays a critical role in helping organizations achieve their business objectives. More than a just a scorecard of how well employees are performing their jobs, effective performance management is about taking action. Your performance management program should work with top performers on the steps they should take to move the next level in the organization or become more valuable asset, and it should provide poor performers with an action plan to improve their performance and meet your standards. Since the longer a new employee works for your organization the greater your potential liability for UI benefit charges, the more effective your performance management system is in identifying unsatisfactory performance and conduct and in either helping the employee succeed in his/her job or in helping you make the determination to separate the employee, the lower your potential UI liability.

3) Effective communication with DLLR. Employers frequently complain about claimants that have refused a job offer or have returned to work but are still collecting UI benefits. Employers are right, claimants that refuse a suitable job offer or return to work should be disqualified or denied benefits. Unfortunately some of these same employers fail to communicate this information to the Maryland Department of Labor, Licensing and Regulation (DLLR). If as employers we want to strengthen benefit integrity and reduce to amount of erroneous benefits, we have to be more active in communication with DLLR. If you know or suspect that a claimant is erroneously collecting UI benefits, contact DLLR. NOTE: DLLR is currently working with the Maryland Chamber and other stakeholders to enhance employer-DLLR communications. More information on benefit integrity issues is forthcoming.

4) Engagement. For a number of reasons, including the use UI third party administrators, employers have become disengaged from both the process and the results of UI cost management. While UI TPAs can provide cost-effective expertise in UI cost control, organizations should not abdicate control or responsibility. If your organization uses a UI TPA, it should develop performance standards against which the TPA’s performance will be measured

For more information or for assistance in assessing your organization’s 2011 tax rates or in developing effecting UI cost controls, please contact Ronald Adler, President-CEO, Laurdan Associates, Inc. 301.299.4117, radler@laurdan.com.

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This is a guest post written for Maryland Chamber members by Ron Adler, President and CEO of Laurdan Associates and Chair of the Maryland Chamber Unemployement Insurance Subcommittee. For more information, contact Ronald Adler, president-CEO, Laurdan Associates, Inc. at (301) 299-4117 or radler@laurdan.com.

Maryland 2010 unemployment insurance (UI) taxes have gone up. The majority of Maryland employers have been assigned a 2010 tax rate of 2.2 percent — up from 0.6 percent in 2009; other employers in the state have been assigned tax rates ranging from 3.1 percent to 13.5 percent — up from 0.9 percent to 9.0 percent. These new tax rates (multiplied by the first $8,500 earned by each employee) translate into a per employee tax liability of $187 for minimum rated employers — up from $51; and per employee tax liabilities of between $263.50 and $1,147.50 for non-minimum rated employers.

As Maryland employers prepare to pay their 2010 UI taxes, many are finding it is valuable to assess the effectiveness of their UI cost management in light of the five steps of UI cost control.

Five Steps of Unemployment Insurance Cost Control

Step #1: Review and verify your 2010 UI tax rate. The state sometimes makes a mistake. You may have filed an amended return or you may have received relief from charges that was not recorded. If you find an error, you have 15 days from the “Date of Notice” shown on your tax rate notice (DLLR/UI 61) to appeal your 2010 tax rate.

Step #2: Ensure your classifications of employee/independent contractor status are correct. It is not unusual for an individual you classified as an independent contractor to file a claim for UI benefits. Since you reported no wages for this individual, this single act can trigger a UI Agency audit of your UI reporting, and potentially more threatening, a full-blown IRS wage and hour audit. Remember for UI purposes, Maryland uses the A-B-C test to determine employee/independent contractor status. That is, unless specifically exempt, an individual is an “employee” if he/she: (A) is not free from direction and control of your organization; (B) is not customarily engaged in an independent business or occupation; AND (C) does not perform work that is outside of your usual course of business or outside your place of business. In light of the changes and restructuring your organization may have made as a result of the recession, it would be prudent to review the work being performed by and the relationship you have with individuals classified as “independent contractors” to ensure your have properly classified them.

Step #3: Ensure your have properly reported wages. Remember: (1) not all payments are included in the definition of wages under Maryland’s UI laws; (2) Maryland’s taxable wage base is defined as the first $8,500 earned by each employee in a calendar year – you should not pay UI taxes on earnings above the $8,500 taxable wage base: and (3) for employees working in more than one state, ensure you have reported wages to the right state – where you report matters.

Step #4: Protect your experience rated account. UI benefits charged against your account affect your UI tax rate and liability. (1) Ensure that all UI claims forms are properly completed and returned timely. (2) Review all local office determinations carefully. If you disagree with the findings; appeal. (3) Review all hearing examiner decisions carefully. If you disagree with the findings; appeal. (4) Review all benefit charge statements to ensure your account was properly charged for benefits. If you find errors, appeal.

Step #5: Assess your human resource management activities. The effectiveness of your hiring practices, performance management systems, employment policies, employee communications, and discipline and termination processes significantly affects your ability to control UI benefit charges. You should review all termination, claims, decisions, and benefit charges periodically to identify and track: (1) the reasons for separations, (2) the number of protestable and non-protestable claims, (3) your success in receiving correct separation-related determinations and decisions, and (4) the numbers UI claims that are precursors for other types of employment claims, such discrimination or wrongful discharge.

Finally, one of the goals of the unemployment insurance program is to encourage employment stabilization. This goal is accomplished by experience rating the organization. Organizations with higher turnover have higher UI tax rates and liability. At the enterprise level, most organizations allocate UI costs as a percent of payroll. However, in larger organizations, their various divisions, locations, profit centers, and supervisors have different internal experience with turnover and separations. In these organizations, the use of internalized experience rating can be an effective tool in more effectively allocating UI tax liabilities and more effectively holding manager accountable for their individual performance.

For more information, contact Ronald Adler, president-CEO, Laurdan Associates, Inc. at (301) 299-4117 or radler@laurdan.com.

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