Unemployment insurance goes up

Businesses across Kansas received sorrowing news in December regarding their payment into the state’s unemployment insurance fund.

In a letter sent out to businesses in the state, the Kansas Department of Labor informed those businesses that the rate they pay into the state for unemployment insurance was going up in 2010.

That increase, according to some businesses in Pittsburg, constitutes a significant increase in contributions to the state’s unemployment fund.

The letter stated: “For the past three years, reductions in unemployment tax rates have been in effect as a result of Senate Bill 86, which was passed by the 2007 Kansas Legislature. Due to the increase in unemployment over the past year and its impact on our state’s Unemployment Insurance Trust Fund, those reduced tax rates will not be in place in calendar year 2010.”

For example, Servicemaster, an employer in Pittsburg for the last 30 years, saw their percentage increase from .51 in 2009 to 4.16 in 2010 - an increase of over 800 percent.
Businesses were informed in early October that the standard tax rates were going back into effect in 2010, but they were not aware of just what those rates would be, until December.

“As a business, we have no recourse,” said Judy Sieb, co-owner of Servicemaster. “We were told that it was coming in October, but we didn’t know how much of an increase it would be.”

Businesses pay their percentage on the first $8,000 of wages for each employee. If a business had 20 employees they were paying unemployment insurance for, it would mean that $160,000 would be the money the percentage paid on.

Using Servicemaster’s rates, in 2009, that means there would be $816 paid into the fund. The increase in the rate in 2010 would mean that the employer would have to pay $6,656 in 2010, an increase of $5,840.

“This increase means that we are going to have to raise to pay for this,” Sieb said. “We have to raise what we charge our customers and, in the long run, those customers may drop us.

“We are positive that we are going to lose some of our customers. It is not a maybe, it is a definite.”

In their October letter to employers, the state said that: “As of Sept. 12, the balance of the UI Trust Fund was $291.6 million. The state is paying out between $14 million and $18 million each week in unemployment benefits, which means there is a strong likelihood the Trust Fund will be depleted prior to the end of the year.”

Midwest Minerals, in Pittsburg, received the same letters from the Department of Labor. Their contribution percentage went from 1.49 percent in 2009 to 5.40 percent in 2010 — an increase of close to 400 percent.

“It will impact our bottom line in a negative way which will impact a lot of other things as well,” said Steve Sloan, president/CEO of Midwest Minerals.

Due to the early closure of state offices on Wednesday, calls to the Department of Labor were not immediately returned.

Midwest Minerals did elect to send a letter of appeal of the new rate to the state stating they “appreciate the issues surrounding our State’s Unemployment Insurance Trust Fund but don’t feel our business should be penalized with increases in insurance premiums that are unrealistically higher (by several hundred percent) than what we have been assessed over the past several years.”

“We understand the money for the fund has to come from somewhere and we sympathize with it,” Sloan said.

But that does not take away from the sting that some businesses will face because of the increase in the percentage rate.

In addition, both Servicemaster and Midwest Minerals has a surplus in their unemployment insurance accounts.

“The reason we are being penalized, to me, is that we have a surplus in our fund,” Sieb said. “Because the state’s fund is low, we have to pump money to build the state’s fund up.”

Matthew Clark can be reached at matthew.clark@morningsun.net or at 620-231-2600, Ext. 140