Presented by Ronald Adler, President-CEO Laurdan Associates, Inc. BWCC Regional Workforce Summit Controlling Unemployment Insurance Costs 1 © 2010 Laurdan Associates, Inc. All Rights Reserved.

The Problem: National Perspective Laurdan Associates, Inc. 2 The nation has been suffering from Economic SARS (severe acute recession syndrome.) Symptoms include: High unemployment High underemployment Long term unemployment High benefit exhaustion rates Depleted state UI trust funds Stress on the Federal UI Trust Fund

The Problem: State Perspective © 2010 Laurdan Associates, Inc. All Rights Reserved. 3 UI benefits exceed UI tax revenue As of January 1, 2008, Maryland had more than a billion dollars in its trust fund; as of January 1, 2010, Maryland had $100 million. Balance as of May 2010 = $521 million UI benefit payments normally $12M to $14M per week reach $24M per week Taxable payrolls decrease The Trust Fund Balance Ratio (Trust fund balance as of September 30 ÷ Total Tax Payroll in the state) falls Lower Trust Fund Balance Ratio triggers higher tax rate schedule

The Problem: State Perspective Laurdan Associates, Inc. 4 Comparison of Table B and Table F Table B Table F TFB ratio: 4.5% less than 5% 3% or less Taxable Wage Base: $8,500 $8,500 Min Tax Rate: 0.6% 2.2% Min Tax: $51 $187 Max Tax Rate: 9.0% 13.5% Max Tax: $765 $1,147.50

The Problem: Employer Perspective Laurdan Associates, Inc. 5 Higher tax liabilities as a result of: Moving from Table B to Table F Higher amounts of benefit charges Moving up the Table to higher tax rates

The DNA of UI © 2010 Laurdan Associates, Inc. All Rights Reserved. 6 The federal-state UI program is a countercyclical tool. The UI program’s purpose is to provide temporary, partial wage- replacement to unemployed workers who lost their job through no fault of their own. UI is not a needs-based program. UI program should be forward funded. UI encourages employment stabilization and employer participation through experience rating. Claimants must show a previous and ongoing attachment to the labor market to be eligible for benefits.

UI Program Guiding Principles © 2010 Laurdan Associates, Inc. All Rights Reserved. 7 The best UI benefit is a job. Experience rating is the best method of financing the UI program and allocating costs. The longer a person is unemployed, the more difficult it becomes for the person to become reemployed.

UI Cost Control: 8 Steps Laurdan Associates, Inc. 8 1) Review and verify your UI tax rate. 2) Ensure your classifications of employee/independent contractor status are correct. 3) Ensure you have properly reported wages. 4) Protect your experience rated account. 5) Assess your human resource management activities. 6) Train supervisors and managers. 7) Measure performance. 8) Hold supervisors and managers accountable.

Presenter Information © 2010 Laurdan Associates, Inc. All Rights Reserved. 9 Ronald Adler is president-CEO of Laurdan Associates, Inc., an HR management consulting firm specializing in HR audits, employment practices risk assessment, strategic HR, and UI cost management. Mr Adler is the co- developer of ELLA®, the Employment-Labor Law Audit™, the nation’s leading HR auditing tool. For more information, contact: Mr. Ronald Adler, Laurdan Associates, Inc River Road, Suite 201, Potomac, MD 20854, ,