In my last blog post, I discussed when an unemployed individual becomes eligible for unemployment benefits, and how they can go about obtaining these benefits. This week, I decided to continue this theme, and write about some of the key issues which employers should be aware of in regards to unemployment benefits.
The Illinois Department of Employment Security (IDES) provides unemployed workers with unemployment benefits, administering the Unemployment Insurance Act (820 ILCS 405). The funds with which the IDES pays these benefits are provided by employers, who must pay a percentage of each employee’s wages into a fund used by IDES to provide benefits.
Most employers will pay a rate of around 4% of the employee’s wages to the IDES. However, this rate may vary based on total taxable wages and benefits provided to employees, as well as the industry in which the employer operates (certain industries like mining, construction, and manufacturing must pay higher rates). Moreover, an employer who has discharged a worker who is collecting unemployment benefits also must pay a higher rate.
Employers must make contributions to the IDES unemployment fund four times a year, on or before April 30, July 31, October 31, and January 31. Each November, the IDES will mail a letter stating what the employer’s contribution rate is for the upcoming year. Virtually all employers must make contributions to the IDES’s unemployment fund, even if they are governmental bodies or non-profits who have employed at least four people in a twenty-week period (although a non-profit might be able to pay a lower rate; contact us for more information). Employers must make contributions by filing a Form UI-3/40, or by visiting this website. Penalties for filing these documents late can range from $50 to $5,000. Unpaid balances accrue interest at a rate of 2% per month.
If an employer hires a new employee, it must file a “New Hire Report” with the IDES. This must include the name, address, Social Security number, and hiring date of the new employee. It must also include the name, address, and Federal Employer Identification Number of the employer.
Since an employer’s contributions to the IDES will increase if one of its discharged workers collects unemployment benefits, it is in an employer’s financial interest to attempt to discharge workers in a way so that they will not receive benefits. Unemployed individuals are eligible for benefits if they are discharged through no fault of their own. For example, a worker who is laid off because an employer lacked work for that individual will be eligible for unemployment benefits. Conversely, if a worker is laid off for cause, like violating a workplace rule, then he will not be eligible for benefits. Therefore, if an employer wants to prevent a discharged worker from collecting unemployment benefits, it should try to collect documentation showing it had good cause to discharge the worker.
Ultimately, there are a number of issues at play for employers when they are dealing with the unemployment insurance system. Failing to properly navigate those issues can lead to fines and possibly lawsuits. Therefore, employers should consider reviewing their compliance with the Unemployment Insurance Act with an attorney.
