@077 CHAP ZZ

    . TIPS ON REDUCING THE UNEMPLOYMENT TAX BITE.

In most states, the unemployment tax rate you pay as an em-
ployer is one of the few taxes where you have some control
over the rate of tax you pay.  The state usually maintains
a reserve account for each employer, in which it monitors
the unemployment taxes you pay in and the unemployment ben-
efits it pays out to your former employees.  The more ben-
efits the state pays to your ex-employees, the higher your
company's unemployment tax rate will be and vice versa.  So
it pays to have as few ex-employees as possible collecting
unemployment benefits that are charged to your reserve ac-
count.

To succeed in keeping down such claims charged to your ac-
count, you need to vigorously challenge any ex-employees'
claims that appear to be unjustified.  Often you will be
surprised to learn that an employee you had fired for steal-
ing or who had quit on you has filed for benefits and has
lied about his or her reasons for leaving.  In general, an
ex-employee cannot collect unemployment based on his or her
work for you if the employee left your employment for one
of these reasons:

        . Refusal to work;

        . Voluntarily quitting, on his or her own accord;

        . Inability to continue work due to illness,
          injury, etc.; or

        . Discharge for misconduct, such as theft, not
          showing up for work, etc.;

An employee who leaves your employ for virtually any other
reason (such as being fired for incompetence) can generally
collect benefits, which will cost you money by raising your
unemployment tax rate.

The following are some tips on how you can keep down the
number of unemployment claims filed against your account
(not all of these apply in every state):

        . Be aware, when you are hiring, of the cost if
          you have to lay people off.  You may hire a
          number of new employees for an expansion or new
          project with the view that if things do not
          work out as planned, you will simply lay them
          off and cancel the project with no further cost.
          Count the cost.  Remember that if you do have to
          lay them off, you may be paying a much higher
          unemployment tax rate for several years as a
          result.

        . Document in writing your reasons for firing an
          employee, if for reasons such as theft, insubor-
          dination, absence, or intoxication on the job
          (but be careful of possible slander or libel ex-
          posure).  Doing so will buttress your argument
          that the fired employee is not entitled to bene-
          fits if he or she should file a claim with the
          state.

        . Be aware that if you change an employee's hours
          of work and he or she quits as a result, it will
          be considered INvoluntary dismissal and the em-
          ployee will probably be eligible for benefits.
          So it pays to have a written agreement signed by
          the employee to work any shift, hours, weekends,
          etc., that are required.

        . If you decide to fire someone for misconduct,
          do it on the spot.  If you keep them on at your
          convenience until you find a replacement, it
          will usually NOT be considered a discharge for
          misconduct, and the fired employee will most
          likely be eligible for benefits.

        . If new employees do not work out, consider ter-
          minating them before they have worked for you
          long enough to earn unemployment benefits that
          are chargeable to your reserve account (3 months,
          in many states).

In general, it pays to keep a close eye on your employer
reserve account and be aware of who is filing benefit
claims that will cost you money.  With the advice of your
lawyer, contest any claims that you do not feel are
legitimate.