Utah Excels in Re-Employing Its Unemployed Labor Force

The U.S. Department of Labor most recent quarterly summary report for October-December 2015 ranks Utah 7th overall when it comes to duration of an individual collecting benefits and 2nd when taken within the context of the maximum number of weeks available.

The average individual qualifies for 21.7 weeks and only collects 12.1 weeks, about half of the benefits they qualify for before returning to work.

The Unemployment Insurance program is funded entirely by employer contributions into a state trust fund. The trust fund is built up during times of economic growth, so it can support elevated levels of benefit payments during the downturns. These benefits provide temporary assistance for individuals while they seek other work that corresponds with their previous skills and experience.

During the 2015 Q4, the average contribution rate for total wages equaled 0.6 percent, well below the national average of 0.74 percent. Because more employers are hiring and more Utahns are working, the balance of the state trust fund is healthy and employers benefit from that with a decreased liability. Utah employers will pay, on average, $60 for unemployment insurance coverage for every $10,000 paid in wages.

Focus on Worker Classification

In a discussion about coverage, there is one fundamental question that employers should ask: Is the individual an employee or an independent contractor?

There are valid reasons for a company to use an independent contractor. However, unemployment insurance coverage and certain other labor laws, such as overtime and minimum wage, apply only when a worker is considered to be an employee. Both for protection of the worker and for companies to compete on a level playing field, it is essential that a worker be classified correctly.

Utah’s statute focuses on two things when it comes to determining the correct relationship:

  1. Workers are presumed to be employees subject to unemployment insurance coverage
  2. Workers may be evaluated as independent contractors if they are shown to be customarily engaged in an independently established business and are free from control or direction

Workforce Services has a dedicated field audit unit that meets with employers throughout the state to verify that this fundamental relationship of independent contractor or employee is being applied correctly. Some questions that are asked during that process include:

  • Does the worker have a separate place of business?
  • Can the worker realize a profit or risk a loss through this activity?
  • Does the worker have any required business, trade, or professional licenses?
  • Does the company require that the worker comply with certain instructions or follow an ordered sequence of duties?
  • Does the company or the worker establish the worker’s schedule and method of payment?

The field audit process starts with an assumption of employment. By reviewing and weighing the individual merits of the situation, we can evaluate if independent contractor status is more appropriate. You can contact Workforce Services to help guide you through the classification process by calling 801-526-9577 or visiting jobs.utah.gov.

The unemployment insurance program preserves a worker’s skills and experience for the greater Utah economy. When unemployment does happen, we’re here to support employers and employees.