All employers in the state of Missouri should be happy that the Division of Employment Security from the Missouri Department of Labor and Industrial Relations is so up to the task when it comes to collecting unemployment insurance taxes from delinquent or fraudulent employers. Why? Because after all that effort you go through to comply with the unemployment labor laws in Missouri, including posting your mandatory unemployment insurance labor law poster, you should expect all of your fellow employers to go through with the same troubles. If not, they are burdening the system, and guess who will ultimately foot the bill for this burden? You and all of the other lawful employers in the state.
It also works both ways too. The Division of Employment Security also collected from workers who got benefits when they should not have. The Department of Labor and Industrial Relations collected more than $1 million from these unemployment insurance claimants. Usually these folks got these improper payments when they still collected unemployment insurance after going back to work, or hiding some sort of facts—like the fact that they got fired instead of laid off—that would otherwise have made them not available to get the benefits.
What is the lesson in all this? Well, at least in Missouri, the lesson is to know that the unemployment insurance system is working because the people in charge—the Division of Employment Security—are out there making sure that employers and employees are following the letter of the law. It also works because solid employers like you are there to post your unemployment insurance poster as lawfully required, as well as report your quarterly payroll and pay your unemployment taxes on time and accurately as appropriate according to your experience ratings.
I think for the past few blogs we have done a good job of going over the two main steps that new employers must do to comply with the unemployment insurance system requirements in most states in the United States. Those were of course to register with your state’s system and to ascertain your liability for paying unemployment insurance benefits. And to acquire unemployment insurance posters for each and every one of your work sites and posting them prominently somewhere in the facilities where your workers could read them pretty easily and regularly.
But once you are set up in such a system, like Missouri’s unemployment insurance benefits system for instance, there are steps you can then take to make your compliance a little less costly and a little more efficient for your business.
When you start out in the Missouri unemployment insurance system, for example, you start by paying a fixed percentage of your employees’ salaries as a tax for unemployment benefits. In Missouri, this fixed rate is based on a Standard Industrial Classification, so new businesses of the same ilk all pay the same fixed rate starting out as employers. At this point, you as an employer cannot affect that rate. Good behavior cannot make it go down, and bad behavior will not make it go up.
After two to three years of this, however, you cease being a “new” employer in the eyes of the Missouri unemployment insurance system, and your rate becomes what is called an “experience” rate. This experience rate is based in part on how many of your former employees have made claims on the unemployment system. In other words, if you have a more stable work situation and have less employees getting laid off, you will have fewer former employees claiming unemployment benefits, and you will have a lower experience rate on your taxes. The vice versa is true as well, and your rate can go up if you have more layoffs and more employees claiming unemployment benefits.
In Missouri, Unemployment Insurance is paid entirely by employers who are determined liable based on Missouri Employment Security Statutes. The State Unemployment Insurance Laws must conform to certain standards in the Federal Unemployment Tax Law administered by the United States Department of Labor. One such law is to post Missouri Unemployment Insurance posters where they are easily visible by employees. By conforming to these laws, Missouri employers are allowed to take a credit on federal unemployment tax returns (FUTA), if state taxes are paid timely.
Of prime importance to the Division is the prompt payment of unemployment benefits to eligible claimants. As stated on Missouri Unemployment Insurance posters, a person must have worked in covered employment and earned certain qualifying wages to be entitled to any unemployment insurance benefits. A separate record is kept of each worker’s wages as reported by their employers on quarterly contribution and wage reports.
An account is maintained for each employer to which tax payments are credited and to which unemployment benefits paid to the employer’s workers are charged. The employer’s tax rate is calculated annually and is based on the relationship of the account balance to the employer’s average annual taxable payroll.
For a sole proprietor, partner, or member of a limited liability company which is classified as a sole ownership or partnership, some family members may not be reportable for state unemployment tax. The family exemption does not apply to the family of the officers or stockholders of a corporation. Wages may not be reportable if the worker is the sole proprietor/partner/member’s parent, spouse, or son or daughter under the age of 21 (natural, adopted, stepchild or foster child).
If you have an active account and have sold your business, closed your business or will operate without employees for the foreseeable future, you need to file a Report on Change of Business Operations. The Division may need to close your account or, if you have sold your business, may need to transfer it to the new owner.
If you have an active account and will have employees in the future, you must file a Quarterly Contribution and Wage Report each quarter, even if you paid no wages in the quarter. Failure to file may cause the Division to assess you for estimated wage amounts and may cause you to receive a penalty.
I have been following the Missouri Unemployment Insurance changes, and there were quite a few in 2004. So I wanted to give a run-down of those changes. One interesting note is that a State Unemployment Council has been formed, and one of their duties will be to make sure that unemployment benefits are adequate. Benefits recipients will also now be cross-checked against the Federal database of unemployment benefits recipients.
The state taxable wage base, which was $8,000, will increase to $11,000 for 2005, 2006, and 2007. After that there will be changes based on how large the unemployment compensation trust fund is.
The employee’s eligibility for unemployment benefits is based on their employment over the first four of the previous five quarters prior to filing the claim. The wages needed to qualify increased from $1,000 in 2004 to $1,200 in 2005. They will increase again to $1300 in 2006, $1400 in 2007, and $1500 in 2008. The base period wage must equal 1.5 times the highest quarter wage, or wages in two quarters and the base period must equal 1.5 times the maximum taxable wage base.
I noticed that the wording concerning employee misconduct has been changed. One of the ways an employee can commit misconduct is by working with alcohol or drugs in their system; if this occurs, unemployment compensation benefits will be cancelled.
I am sure that employers will be interested to know that the tax rate increase for them at the maximum rate is raised from 30 percent to 40 percent through 2007. The fund balance amounts that trigger 10 percent, 20 percent, and 30 percent increases have been reduced, which increases employer tax rates. The fund balance amounts which trigger 7 percent and 12 percent rate decreases was raised, which also increases employer tax rates.
Detailed information regarding unemployment insurance along with all other state laws can be found on the Missouri Complete Labor Law poster. This posting includes the federal information as well.