New rules are changing how businesses pay unemployment benefits, meaning that nearly half will see their payments reduced, but a few will pay more —a lot more.
A change in state law last year means the Department of Employment and Workforce will now base unemployment insurance payments on how often the company lays off employees. Agency spokeswoman Adrienne Fairwell says the new system is meant to be more fair.
It’s unemployment insurance so, as the name suggests, those that have a more stable employment base would not see their rates increase. They would actually either stay the same, or decrease.
The new system creates 20 tiers that would set the companies’ pay at different rates, depending on their employment history. Fairwell says the new rules would lower the payments for companies that have a good history of keeping their employees.
Fairwell says more than 45,000 businesses, almost half of the state’s employers that pay wages, would see their payments decrease this year from $85 per employee to $10 each.
However, it would also nearly triple the amount that more than 9,000 companies pay into the system. The old cap was $427 per employee, but the highest tier now has a $1,127 limit.
South Carolina Manufacturers Alliance President Lewis Gossett says the result wouldn’t be good for employees at that tier of companies.
You have to get (the money) somewhere. You either reduce the paid benefits for the employees you have, or you reduce money that you’re spending out in the community, or you reduce your workforce. One thing you certainly think twice about… is hiring new people.
Gossett said more than one company has told him the new rules will cost it at least $500,000 each year.
Gossett says, although he understands the state’s approach, the new system also has serious flaws. He says because nearly half of all employers got a tax cut, the system may be unsustainable.
If you buy an insurance policy, just because you don’t have any claims doesn’t mean your premium goes down to practically nothing. And that’s in essence what’s happened… The plan is a good plan, but it’s going to have to be tweaked because the numbers didn’t work out like they expected.
The General Assembly passed the changes last year in order to help pay off federal loans. South Carolina had to borrow the money after the former Employment Security Commission’s trust fund went bankrupt. The new changes are in place until 2015.