How Strategic Collaboration Maximizes Savings and Efficiency

Employers often view SUI taxes as unavoidable, but the right partner can significantly influence how these costs are managed. HR and payroll leaders have more control than they may realize, and although savings can be substantial, it often takes time to fully realize the benefits of proper unemployment management.  Let Thomas & Company experts outline six proven ways employers can mitigate SUI tax exposure, showing how you can play a strategic role in controlling costs.

Employee turnover, whether voluntary or involuntary, can raise your tax exposure in two main ways. SUI taxes are paid on employee earnings up to a state wage base limit. When an employee leaves and is replaced, you are responsible for an additional taxable wage base for this new hire, which can increase your tax costs.

Unemployment claims also affect your experience rating, which sets your tax rate. While states use different formulas, more unemployment benefits charged against your state tax account(s) usually leads to higher rates. One year with many claims can raise tax rates for years to come.

What Can You Do?

• While some turnover is unavoidable, seek ways to reduce the overall number of terminations. Supporting employees with clear career paths, ongoing professional development, upskilling opportunities, and expanded income pathways can strengthen retention. Regular feedback, recognition programs, and strong internal mobility practices also help reduce avoidable turnover.
• A probationary period is defined as a period of time (usually between 30-90 days) where the employer can assess the employee’s performance, attitude, and overall culture fit while the employee also has the opportunity to evaluate whether the job meets their expectations. If it is determined that the employee is not well-suited for the role, making a decision to part ways during the probationary period can be more straight-forward. While terminating an employee during their probationary period does not relieve the employer of charges (unless discharged for misconduct), it can help minimize your exposure to unemployment costs by limiting the total wages paid to the individual.
• If an employee is struggling in their current role, explore alternative positions or skill-building opportunities within the organization before considering termination.
• If layoffs are necessary, consider moving employees to other departments or roles to keep them employed. Additionally, structuring the timing of a layoff can help defer potential tax rate impacts to future years. While timing alone may not eliminate the effect entirely, strategically planned reductions can lessen immediate financial consequences.
• For temporary layoffs, check if your state offers workshare programs. These agreements, available in 26 states, let employers cut staff hours and provide employees with partial unemployment benefits, helping retain key staff during slow periods.

Consistency in HR practices can lower your tax liability. Not every departing employee will file for unemployment, but consistent policies and clear documentation are vital when claims arise. States may request separation information for up to approximately two years after an employee leaves. If you lack documentation, approved claims may lead to higher SUI tax rates.

What Can You Do?

• Establish clear disciplinary policies in your policies and employee handbook.
• Obtain signed acknowledgments from all employees confirming they have read and understood company policies.
• Apply disciplinary actions consistently and in accordance with company policies.
• Keep thorough records of performance appraisals and disciplinary issues, including verbal warnings. Ensure relevant details like financial incident information, witness statements, and relevant supporting documentation are kept on file.

While the state makes the final decision on payment of unemployment benefits, the claimant must meet strict guidelines determining their eligibility and there are circumstances where claimants should not qualify, including:

• Discharge for misconduct: Willful disregard, deliberate violations, or repeated carelessness.
• Voluntary quit without good cause attributable to the employer: For example, quitting over a disliked schedule without requesting a change.
• Special pay: Receipt of severance or termination pay, 401(k)/pension, or retirement disbursements may disqualify an employee from benefits until the pay period ends.
• Availability issues and job refusals: Declining a suitable job offer or refusing agreed-upon shifts may result in disqualification.

What Can You Do?

• In these cases, share detailed, relevant information with the state. This includes details and documentation about the final incident, witness statements, prior warnings, relevant policies, signed policy acknowledgement, and any other details directly related to the reason for separation.
• For special pay, provide the amount, whether it is paid as a lump sum or over time, and the period it covers.
• Supplying the facts of the case also keeps you in compliance with UI Integrity laws and helps the state appropriately decide the claimant’s eligibility. As an employer, you are responsible for timely and accurately responding to state requests related to separations. Failure to do so can lead to penalties and the state may prohibit you from receiving relief of charges against your unemployment tax account.

There are two components to a claim: eligibility (the right to receive benefits under legal rules) and chargeability (whether your tax account is affected).

While rules on chargeability vary by state, it is important to provide all the details for each separation, as they may affect your chargeability for those claims.

What Can You Do?

• Submit all separation details and supporting documents promptly when a claim is received.
• Timely, thorough, responses give the state the information needed to make informed decisions and can result in incremental savings that positively affect your SUTA experience rating over time.
• Remember, even a few approved claims can substantially impact your SUI tax rate.

States charge your experience rating account as they pay benefits to claimants. Most commonly, employers receive a statement of benefit charges every quarter. Some states send these statements monthly or weekly. States can, and do, make mistakes, charging employers incorrectly. For example, if you appealed a claim and won, you should not be charged for those benefits. If used to calculate your tax rate, these erroneous charges can have a negative impact on your tax exposure.

What Can You Do?

• Regularly audit charges against your SUI account to make sure benefit payments are accurate. Updates after appeals or reversed claims should appear correctly. Sometimes you are charged for a person who never worked for you because of mistakes with their Social Security or account numbers.
• When these errors happen, it is critical to uncover and protest the charges immediately in order to control costs and limit unnecessary tax exposure.

Each state requires employers to submit quarterly contribution reports and payments for unemployment insurance. While it can be tempting to forgo filing when no taxes are owed for a given quarter, skipping or submitting late filings can have a significant impact on your future SUI tax rates. Missing deadlines or failing to file quarterly returns, even if there is no tax obligation, may result in penalty rates. These penalty rates can dramatically increase your tax liability for the following year.

What Can You Do?

• Filing your quarterly contributions is one area where you have complete control. Implement a rigorous process to ensure your team—or your designated third-party tax service—files all reports and makes required payments on time, every quarter.
• Even if you do not owe taxes for a particular period, states can still impose penalty rates for missing or late reports.
• Maintaining an ironclad filing routine helps protect your business from unnecessary penalties and ensures your SUI tax rate remains as low as possible.

Bottom Line

Employer state unemployment taxes fund unemployment benefits, so SUI taxes are among the few taxes employers can control. Our analysis at Thomas & Company shows opportunities for savings of at least 20% on unemployment programs by unifying claims and tax management. When HR and finance work together to implement strategic best practices, small changes can save thousands in yearly taxes.

Let Thomas & Company Do the Heaving Lifting

By following these six tips, employers can significantly improve their SUI outcomes and minimize tax exposure. However, staying on top of every detail can be time-consuming and complex. That’s where a partnership with Thomas & Company makes all the difference. For over 30 years, Thomas & Company has helped national employers reduce unemployment tax exposure, ensure compliance, and simplify workforce processes. With deep expertise and advanced technology, Thomas & Company uncovers savings and increases operational efficiency throughout the unemployment lifecycle.

We handle the heavy lifting by managing claims, auditing charges, and ensuring timely, accurate responses on your behalf. Our team also provides ongoing education on unemployment best practices, empowering your organization to stay compliant and make informed decisions.

With Thomas & Company as your trusted partner, you can focus on your core business while we help you secure better SUI tax experience ratings and keep your costs under control.

Transforming SUI Tax Management Strategy Through SHIELD Technology

SHIELD is Thomas & Company’s integrated business hub for managing unemployment claims, tax analysis, benefit charge review, and compliance in a single, secure platform. SHIELD provides visibility across unemployment processes, enabling faster responses, fewer errors, and real-time tax-saving insights.

With role-based dashboards, automated document intake, audit-ready reporting, and built-in safeguards, SHIELD enables HR, payroll, and tax leaders to proactively manage SUI tax exposure. Combining automation with Thomas & Company’s expertise, SHIELD shifts SUI tax management from reactive to strategic.

Take the Initiative—Start Transforming Your SUI Tax Management Strategy Today

Schedule your SHIELD Demo today or contact your Account Manager to discover how Thomas & Company can help optimize your SUI tax management strategy. Start now to achieve a more accurate, compliant, and cost-effective unemployment operation.