There’s a lot of misinformation in the marketplace about what it takes to reduce unemployment costs. That’s where UTCA comes in.  Our role in the industry as an honest information broker and Thought Leader focuses on clearing up areas of legitimate confusion or manufactured misunderstanding.  Our tagline “Educating the Marketplace, One Client at a time,” says it best. 

As mentioned in a previous blog “Big Data, Big Confusion”, if you really want to get your unemployment costs down and manage your program efficiently, then understanding your data is absolutely required.  Now that you understand your data, what do you do to reduce your costs? For the most part, the only ways to reduce your unemployment spend is to do one of two things:

  1.  Reduce claim payments
  2.  Reduce your payroll

Yes, this is an oversimplification but the facts are quite simple.  Option 1 is preferable to Option 2, with Option 2 likely to increase your UI future rate but not your actual spend.  Think:  Moving in to a smaller home, in a cheaper neighborhood and reducing the value of the “taxable item”.  You may still live in the same town with high property taxes but your newer home is of lower value, so your spend drops.  The same thing applies to unemployment taxes.  If an employer reduces their payroll size, they pay less in raw tax dollars, even with the same or higher rate.  But how practical is that when your business still has customers to please and you really need those employees?  Not very.

Enter Option 1.  Reduce claim payments.  For self-funding employers, each dollar of claims savings drop directly to the bottom line, making this area a legitimate focus for improved financial performance.  Rated employers can realize substantial savings but the results are not as direct.  Depending on their account balance (reserve ratio or benefit ratio etc.) savings or costs can quickly cascade to their rate assignment.  Success in averting just a $1200 claim, where avoiding payment triggers the next lower rate, can reap ten or hundreds of thousands in tax savings! Year-on-year claim avoidance, building reserves and judicious payment of claims can pay big dividends in terms of ROI and true bottom line savings.

One of UTCA’s largest clients (in a high turn-over, heavily regulated industry) generated over 3M in direct tax dollar savings while most employers were witnessing significant rate escalations by strategically managing their UI program and in particular their “key data” (Disputable Claim Percentage – DCP and Hearing Run-Off factor – HRO).  This employer recently increased their DCP from 60+% to 88% and have historically generated DCP levels of 60% or greater.

How did they do it?  First step, they said good-bye to the large, national vendor that failed to deliver service capable of generating real cost and time savings.  This employer witnessed steady increases in their rates and was spending more time monitoring their “service” provider including performing functions related to UI, which should have been completed by their vendor. They understood achieving REAL savings means picking the right business partner to help guide them through the development and execution of an effective process. Here’s what they did:

  • Incentivized their HR team and witnesses by “educating” them as to their role in reducing claim payout – including quickly communicating feedback and results from claim matters, in particular hearing participation.
  • Worked with UTCA to develop and implement effective, clear protocols that linked communication and response levels to results generated.  To quote Wayne Gretsky “You miss 100% of the shots you don’t take”.  If you or your vendor fails to respond timely or accurately to a claim matter, you’ve missed your shot and the claim will likely be paid.
  • Processed and quickly disseminated feedback from UTCA related to issues which did not “play well” in the UI process (i.e. weak policies, poor or inconsistent implementation of policies, recent law changes impacting management practices etc.).
  • Participated in periodic information-sharing sessions with UTCA to exchange information and feedback, targeting improvement areas and to review successes.

Our most successful program users understood abdicating their role in reducing UI costs, to vendors only too willing to exploit this scenario, did not yield the results they were promised.  That’s why UTCA starts the education process with potential clients as early as our first touch point, so they are knowledgeable and well prepared “consumers” of our service.  And highly motivated, successful program utilizers! Because we truly value our client’s time and resources, our program ensures clients are in the information loop but spared the time consuming activities related to the “tasks” of managing their unemployment programs.