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How SUTA Works and How to Keep Your Security Guard Billing Rate Low

I remember very clearly the first time that I saw the results of a bid where every bidder was required to submit their company cost (i.e. Unemployment rate, uniform cost, workers comp, etc.) to show how their billing rate was calculated. I also remember the shock of comparing my company’s State Unemployment Tax Act (SUTA) rate against some of the other bidders. I thought that something had to be wrong with our rate because it was noticeably higher thansome of the other bidders.  So I did a little research and figured out how SUTA is calculated.

Although it is never fun to fire an officer, it’s even worse if you fire one and then get penalized with a higher unemployment insurance rate for your trouble. Up until that time I didn’t have a formal process to accurately document security officer terminations and I was paying the price with a high SUTA rate.

As a security guard company, if you don’t terminate an officer for cause and with documentation to back it up, the state may award the officer some unemployment compensation, which will increase your SUTA rate. Understanding SUTA is critical: A higher SUTA rate directly increases your cost of doing business, making your bids less competitive and less profitable.

Here’s what you need to know about how to control this unavoidable cost of doing business.

Only (or Mostly) Terminate for Clear Cause

Most employers pay into an unemployment fund, so if employees are laid off they can draw unemployment benefits, says Angela Saizan, director of accounting at HR Solutions. As an employer, you really only want an employee to draw unemployment if you had no cause to let them go other than changing business needs, ie. a layoff.

In some states, when you terminate an employee for cause, you send a notification to the state letting them know what happened. But this doesn’t stop the employee from applying for unemployment benefits, Saizan says, and you may find yourself engaged in a lengthy appeals process.

Unfortunately and as we all know, there is no tried-and-true way to eliminate the chance of a security officer filing an unemployment claim. Francis Boustany, a human resources representative at HR Solutions agrees with that, however he says that keeping the process civil can help. “Some people will file just to get back at the company after a termination, so make sure the termination isn’t a surprise and goes as cordially as possible.”

SUTA by state

Establish  Strong Disciplinary Procedures

One of the best ways to protect yourself against unemployment claims and to mitigate the risk of a high SUTA rate is to ensure you have a clear disciplinary policy.

A strong disciplinary procedure will have an explicit protocol for security managers to follow. Progressive discipline — increasingly punitive steps depending on the number and seriousness of infractions — can deter security officers from filing false or frivolous claims.

“The first step is usually a verbal warning to the employee,” says Kathleen David, a human resources representative at HR Solutions. This step lets the employee know what the employer’s concerns are, and how the employee can improve. The next step is usually a formal written warning. “At that time, in addition to the suggestions on how to improve the situation, it’s noted what the consequences of not improving could be.” From there, an employer may have another, stronger written warning, or go straight to the final written warning, after which an employee is terminated.

Keep an Accurate Paper Trail

The best disciplinary procedure in the world is no good if you don’t enforce it. Train your managers on how to effectively document disciplinary issues. Even if one of the steps in your progressive disciplinary policy is a verbal warning, managers should write down the date and time of the meeting, who attended the meeting with the officer, what was discussed and what the next steps will be.

Be explicit about what your officers can do to improve, David says, as that will create a record of the employer trying to help employees improve, rather than simply trying to punish them.

Accurate documentation also includes meaningful annual reviews. If an officer is terminated for cause but has spotless annual reviews, that might raise red flags to the appeal board if there is a claim. Ensure managers document infractions as they happen, and that they prepare accurate annual reviews rather than just recording positive things to get through the process easily, he says. “The best practice is to be consistent and document everything.”

I learned the hard way that when it comes to SUTA, the best offense is a good defense. Do you currently have a program in place to manage your SUTA rate? If not, do you think that your SUTA rate could be lower? Please feel free to leave your comments below.

 

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By Courtney Sparkman


OfficerReports.com logoOfficerReports.com is a software company that provides security guard companies with an easy way to monitor their officers, better manage their operations, and win new business. Take a tour of our software to see how we combine Electronic Reporting, Real-Time GPS based Tour Tracking, and GPS based Clock In and Out into one easy to use platform.


 

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