5 Reasons To Outsource Unemployment Claims Compliance Needs

5 Reasons To Outsource Unemployment Claims Compliance Needs

If you outsource unemployment claims compliance, HR can focus on more important HCM needs.

If you outsource unemployment claims compliance, HR can put more of its attention on it's most important function — namely, taking care of your employees. But this decision may go well beyond helping HR. Your processes for managing unemployment claims compliance could also be costing your organization a fortune.

According to the DOL, "The estimated rate of improper payments of [Workforce Investment Act] programs was approximately 0.88 percent. Applied to FY 2015 outlays of $2.53 billion, the estimated dollar amount is approximately $22.26 million." But if you outsource unemployment compliance, the decision could pay for itself for these five financially-sound reasons.

1. Cost-Effective Compliance

Setting up your own system for unemployment compliance can be a sizable investment. You may need to determine and set up controls to process and monitor the system, train staff to understand unemployment claim issues and coordinate the system with your payroll.

An outsourcing firm should already have a fully functioning system in place. You'll be able to gain access to their interfaces for processing claims. They should be able to integrate your payroll to automatically keep track of records and for paying your unemployment tax contributions. The firm will have a fully staffed team of experts so you don't have to worry about adding new staff or employee turnover.

2. Reduce Claim Liability

If you're not confident in your unemployment compliance, you may end up paying claims out of fear of doing something wrong. However, when you outsource unemployment compliance, the outsourcing organization will establish the right controls to help prevent wrongful payment of claims.

If a former employee makes a claim, the outsourcing firm can help make sure that you have established processes and procedures in place to properly document employee terminations in the event that the employee files a claim for unemployment. If your organization decides to challenge a claim in court that requires legal representation, your outsourcing firm may offer third-party representation. This solid base gives your organization the confidence to take on wrongful unemployment insurance claims.

3. Let Your HR Department Focus on HCM

Managing unemployment can be a lengthy process that takes up your HR department's limited resources. Any time spent on unemployment claims compliance is time not spent on managing other HCM needs. Your HR department may not have as much experience with unemployment claims compliance so they might not know how to set up the right controls or handle training for your staff. By outsourcing the job to unemployment claims compliance experts, your HR department can focus on more pressing HCM issues.

4. Identify Mistakes Through Audits

Organizations struggle to keep up with ongoing unemployment claims and often do not have time to audit claims history. This is a missed opportunity because state governments can make mistakes in their calculations, you can overpay a claim or the government could be charging you the wrong tax rate.

An outsourcing firm can perform this audit to catch errors in your unemployment records. If they discover a mistake, they can help determine if your organization can obtain a credit against future unemployment taxes. At the same time, they can help establish new controls to prevent these mistakes from happening again.

The outsourcing firm can also see how your unemployment tax rate compares against similar organizations to see if you've been accidentally misclassified. If so, the organization can help develop a strategy to bring your tax rate down to its lowest possible level and maintain your compliance with state law.

5. Keep Up With Differing State Regulations

One of the biggest difficulties with unemployment claims is every state has its own unique regulations. Your HR department would need to keep track of every single state, which is a full-time job they don't have time for.

When you outsource unemployment claims compliance, the outsourcing firm will likely keep track of important regulatory developments for you. They will watch out for all new regulations and update your system for compliance as necessary to help you avoid exposure to fines or legal issues. They can also advise you on the tax rates and best strategies for each individual state.

Ultimately, outsourcing unemployment claims compliance could not only be simpler, but healthier for your bottom line.