This issue has been around since the very early years of the unemployment insurance (UI) program in the United States: Where do you report an employee’s wages if the employee works in more than one state or in a different state than the employing company is located?

While in general, workers’ wages are reported to the state where the work is performed, it became clear early on that many employers had workers that crossed state lines and they wanted to avoid duplicate taxation of these wages. Therefore, an agreement was signed between the states providing a methodology known as “localization of work” to determine where wages should be reported. The US Dept of Labor developed model legislation that was passed into law in every state during the 1940’s. An agreement between Canada and the United States was signed in 1947 to include Canada in the localization of work agreement to avoid duplication of taxation when workers crossed the border.

To insure uniform interpretation of the localization of work provisions, the US Dept of Labor issued an Unemployment Insurance Program Letter (UIPL) No. 291 on July 1, 1952. I had the distinct pleasure, as Chief of Tax for the US Dept of Labor, of updating and re-releasing this information on May 10, 2004, as UIPL No. 20-04. This UIPL still serves as a guide to the business community, all states, and Canada for determining where wages should be reported.

In a nut shell, localization of work provisions should be applied in the following sequence in order to determine where wages are to be reported:

(1) Is the individual's service localized in this state or some other state?

(2) If his/her service is not localized in any state, does he/she perform some service in the state in which his/her base of operations is located?

(3) If the individual does not perform any service in the state in which his/her base of operations is located, does he/she perform any service in the state from which the service is directed and controlled?

(4) If the individual does not perform any service in the state from which his/her service is directed and controlled, does the individual perform any service in the state in which he/she lives?

For further explanation and examples, UIPL No. 20-04 may be found in its entirety by following the link below:

http://wdr.doleta.gov/directives/corr_doc.cfm?DOCN=1565

Rett Hensley TALX Consultant

Click here for schedule and factor changes for 2009-2010 through 2/15/10.  Check back often for updates. 

If you are interested in getting more current information, along with notification for all legislation that could impact your unemployment tax rate, contact Pete Krieshok at PeteKrieshok@talx.com and ask about our Enhanced Rate Forecasting.  Tell him Tammy sent you.

Tammy Mullin

The Congressional Budget Office (CBO) has issued its budget and economic outlook for fiscal years 2010 through 2020. The report concludes, in part, that unemployment taxes will increase from $38 billion in 2010 to $75 billion by 2013 and continue to rise to $84 billion by 2020.

An employer’s unemployment rate is determined not only on the employer’s individual experience, but on the health of the state’s trust fund balance. As of this date 32 states (including Virgin Islands) have borrowed federal funds in order to pay unemployment benefits. A total of 12 states have borrowed in excess of $1 billion.

New Hampshire is adopting a Shared Work Program to join the other states mentioned in last week's blog Shared Work Programs.  It looks like public opinion is mixed with some worried that it will put pressure on an already over-burdened unemployment fund and others concerned that it is helping employers cheat their workforce. 

In order to qualify for these types of programs, the employer must show that work hours have been reduced, so they aren't really getting free labor as some may think.  Also, when all is said and done, the unemployment charges are charged back to the employer's unemployment account which they pay back eventually through unemployment taxes anyway. 

So, I don't believe employers see this as a way to cheat the system.  If anything, it benefits the employee, who is able to stay employed and will be better off when business turns around.  They can get back to full-time employment more quickly than folks involved in a straight layoff. 

As far as the burden on the unemployment fund goes, it should pretty much even out in the end.  If you have to cut labor in half, whether you do it by laying off full time workers or cutting everyone back to part time, the math should work out the same in the end. 

What do you all think?  Are shared work programs good for the employer, the employee or both?

Tammy Mullin

The following is part of a bulletin going out to our clients.  Since this is such a front of mind topic, I thought I'd post here as well so everyone can get an update.

Situation

With federal Unemployment Insurance (UI) extensions set to expire at the end of this month, the Senate Finance Committee introduced a legislative proposal on February 11, 2010, to reauthorize UI provisions. Included in the HIRE Act (Hiring Incentives to Restore Employment) proposal is a three month extension of federal Emergency Unemployment Compensation (EUC), Federal Additional Compensation (FAC), and federal funding of state Extended Benefits (EB). The estimated cost for these reauthorizations is $22 billion.

In addition, Senate Majority Leader Harry Reid (D-NV), has stated he will bring a smaller version of the Senate Finance Committee bill to the Senate floor on February 22, 2010.

What Employers Need to Know

The UI assistance measures originally implemented under the American Reinvestment and Recovery Act (ARRA) were extended through February 28, 2010, due to reauthorizations signed into law on December 19, 2009. A summary of UI provisions currently in effect are as follows:

Emergency Unemployment Compensation (EUC) – Persons who exhaust their 26 weeks of regular unemployment benefits may establish or augment eligibility for up to four tiers of EUC. The reauthorization does not add any additional weeks of EUC; it simply extends the date an EUC claim may be established. The program continues to be 100% federally funded from Treasury general revenue. The following table illustrates available EUC benefits.

State Extended Benefits (EB) Full Federal Funding – Normally, the funding for state EB is shared – 50% by the states and 50% by the federal government - but was temporarily changed to 100% federal funding under ARRA. The December 2009 reauthorization pushes back the expiration of full federal funding from Treasury general revenue to the end of February 2010.

Note: By law, government entities and Indian tribes are not covered under normal federally shared or temporary full funding of state EB, and will liable for any EB paid to their unemployed workers.

Federal Additional Compensation (FAC) – A $25 supplement continues to be added to all weekly UI benefits paid, be they regular, EUC or EB. The financing of FAC will continue to be 100% federally funded from Treasury general revenue.

Next Steps

The HIRE Act proposal will not change any of the core UI elements noted above. It will simply push back the expiration date to May 31, 2010.

Tammy Mullin

Shared Work Programs are voluntary employer programs intended to provide a practical and mutually beneficial alternative to layoffs when business declines. These plans enable companies to keep their skilled workforce intact, and eliminate costs associated with recruiting, hiring and training new employees.  Participating workers are able to avoid hardships associated with total unemployment.  Both are able to quickly return to full operational status, once economic conditions rebound.

In basic terms, the hours of all workers participating in an approved Shared Work Program are reduced, but lost wages are then supplemented by partial unemployment insurance (UI) benefits.  Participating workers are not subject to normal unemployment requirements regarding availability and work search; however, they must be available for their scheduled work week.

Employers interested in participating in a Shared Work Program must apply for plan approval with the state unemployment insurance agency.  Once formally approved, an employer will need to supply weekly or bi-weekly certification information on each participating worker to the agency.

Each state agency’s plan will specify:

·         Plan duration (generally 6 months to a year)

·         Range of reduced hours allowed (normally10%-40%)

·         Number of partial UI benefit weeks allowed (usually 26 or 52 weeks)

·         Amount of weekly UI benefits payable

The states listed below offer Shared Work Programs.  Details can be found on the unemployment agency websites as follows:

Tammy Mullin

We know that all states handle their own unemployment insurance programs and have their own rules and regulations regarding unemployment in a variety of categories including how much they pay for weekly benefits and who qualifies for unemployment.  But, did you ever wonder how all those differences combine to determine what it costs an employer to do business in each state from an unemployment perspective? 

Well, below is the maximum amount you could have paid in 2009 per employee in your state if you were max rated in descending order from most expensive to least expensive. 

Tammy Mullin

HR Service Matters

By: Mike Smith

Well maybe you guessed it, but I bought Seth Godin’s book; Linchpin (see my 1/26 blog).  The book’s main premise as I see it is that a new and important workplace component (the linchpin) has arrived.  The linchpins are the people that invent, lead, connect with others and generally make things happen.  While the book is intended to help the individual learn how to be a linchpin and thus become indispensable, I think we all want to cultivate these folks and have many linchpins in our organizations (and expectantly on our individual team).

As I quickly thumbed through my new read, I noticed that in one chapter Seth writes about “The Culture of Connection.”   Here I saw another insight for HR services.  Linchpins need to connect to succeed.  I believe HR can and should provide the services to help their linchpins connect inside and outside the organization.  Seth speaks about job satisfaction and offers the proposition that the key distinction between places to work is really the perceived connection between the employee and coworkers.

We have all seen the excitement in the marketplace about “we’ve got an app for that.”  Employees live in that world and I’ll bet the linchpins thrive in it.  We would do well to create an environment that enables collaboration and connecting tools for our linchpins.  I believe that getting some visibility for the people who are making a difference in our organizations will go a long way to building linchpins and keeping them too.  Do you have an app for that?

Here is a more detailed review of Linchpin if you want to know more about its content.

http://www.ratracetrap.com/the-rat-race-trap/linchpin-a-review.html

Hire Now Tax Cut Act of 2010

Once again we are seeing congress take an active role in stimulating job growth and getting Americans back to work.  The Hire Now Tax Cut Act of 2010 was introduced February 3, 2010, by Utah Senator Orrin Hatch.  The bill will allow an employer to hire unemployed workers and not pay the employer’s share (6.2%) of the Social Security payroll tax for the remainder of 2010.  The payroll tax incentive would provide an immediate impact to hire employees now rather than waiting until 2011 for a tax credit. 

An additional incentive of $1,000 is available if the employer keeps the qualified employer on the payroll for a continuous 52 weeks.  If a worker is eligible for the Work Opportunity Tax Credit (WOTC), the employers must select one benefit or the other for 2010.

 “This is an affordable, effective and targeted proposal to get the American people back to work,” said Hatch.  “As a conservative, I appreciate that this proposal isn’t about more and more government spending; it’s about tax relief to get employers hiring again, which is exactly what millions of unemployed Americans most desperately need.”

The devil is always in the details and there are many to iron out as this bill works it way through Congress.  We will face similar issues that we had with the new WOTC stimulus categories this year, such as how will employers verify that an individual was unemployed.  There are also concerns by many that the slow economic recovery will not lead to higher payrolls in 2010 than in 2009.

Angela Lockman

Even while forced to layoff part of their workforce thereby reducing capacity, employers continue to foot the bill for rising unemployment costs.  They not only fund benefits for their own displaced workers, but also for workers of companies that have gone out of business.  On top of all of that, employment litigation rises during times of increased unemployment increasing the burden further on the employer. 

Employers need to properly prepare for a layoff situation paying particular attention to the selection criteria for individuals involved (see also TALX Blog "Preparing for a Layoff".) 

Tammy Mullin