v'ܩ Unemployment Insurance: I Had No Idea!
Home > Uncategorized > Unemployment Insurance: I Had No Idea!

Unemployment Insurance: I Had No Idea!

February 5th, 2010

I read an article on the New York Times website about how much employers must pay in unemployment insurance. It’s really quite a bit more than I would have expected. I know my company keeps people on, sometimes for as long as 2 years, as contractors before hiring them on full-time. I suspect this is partially to avoid these types of problems where you hire someone and need to fire them in 45 days and don’t want to be subject to the unemployment penalties.

If small businesses have to be worried about a half percent increase in what they pay in unemployment insurance when they need to fire someone for incompetence it’s no wonder they are hesitant to hire new people.

From the article:

Here’s how it works in Illinois. The important point for business owners to know is that when the state pays out claims to a company’s former employees, that company’s unemployment tax rate goes up. For each business, the state calculates how many dollars have been paid in compensation over the previous three years and adds on about 48 percent through various calculations. The result is that in Illinois, you end up paying for incremental compensation claims at a rate of $1.48 for every dollar that a former employee collects.

Author: T.J. Seabrooks Categories: Uncategorized Tags:
  1. February 6th, 2010 at 06:42 | #1

    The reason employers use contractors instead of full-time employees is threefold. Two are related to cost.

    1) There are hidden costs beyond salary or hourly wage. A full-time employee not only receives health insurance, life insurance, and other benefits, the employer is also responsible for paying half of the employee’s social security tax, and some portion of their unemployment insurance. Typical calculations say figure the hidden costs will amount to half what the employee earns in direct compensation. So a contractor is generally about 33% cheaper than a full-time employee.

    2) Business rises and falls, and needs come and go. If you need an employee this year, you might not need him next year. This is where your consideration comes in: there are costs to laying off employees, but no comparable costs to releasing contractors.

    3) Legal considerations create enormous barriers to firing employees for cause. No such barriers exist for releasing contractors.

    You may ask why, if this is true, your employer ever hires anybody full-time. The answer is, some employers don’t. But yours is decent: they don’t mind paying you benefits if you’re competent, honest, and fit in, and they really don’t want to steal from you. Also, full-time employees are more loyal, and less likely to move on to greener pastures; finding and hiring new employees costs a great deal of money, and training them takes a long time.

  2. April 25th, 2013 at 20:28 | #2

    I seriously love your website.. Pleasant colors & theme.
    Did you create this website yourself? Please reply back as I’m hoping to create my own site and would love to find out where you got this from or exactly what the theme is called. Thanks!