June 26, 2012

In-House Employee Development

In almost every nonprofit setting, it’s pretty safe to say that leadership requires the most out of every employee to create the greatest possible impact on the governing mission. Whether this means that case workers take emergency calls from clients more than they are schedule to, or that an administrative assistant wears multiple hats as the social media coordinator, office manager, event planner, and even an intake specialist, continually changes. But, despite the great pressure nonprofits place on each employee to give their absolute best, employee development is often overlooked.

A recent Bridgespan Group survey has revealed that most nonprofits rank their ability to provide development and growth opportunities to employees as their fourth greatest management weakness overall even.*

The same survey went on to explain that a lack of employee development has become the “Achilles heel” of the nonprofit community. Because only 30 percent of nonprofits have created or sustained an agency-wide plan for employee development—and only 23 percent of those track its progress—the large majority of organizations don’t have a clear understanding of what skills they need for each position as their mission evolves. Many more don’t even have an idea of where that talent would come from.

To help you develop a plan to address future leadership gaps, Bridgespan put together a list of 52 free ways that nonprofit agencies can improve their internal employee development. Some of the easiet and most impactful employee development initiatives that they list include:

  • To prepare employees for positions of team leadership and management, have key employees lead monthly meetings
  • Allow potential future leaders to manage junior staff such as interns or volunteers
  • Organize and execute team building activities at monthly meetings
  • Allow key employees to represent the organization in professional or community networks
  • Ask employees you want to develop to participate in drafting portions of grants or business contracts to improve their business capabilities
  • Have staff participate in developing key budgets
  • Ask staff to organize initiatives throughout the organization or in the community

On its own, on-the-job development isn’t enough though. To foster truly effective options for employee and organization development, get your board involved with individual employees through the agency. And have each person who is involved with your development program—whether that is a board member or a developing leader—regularly assess what works best at getting employees ready so that you are more likely and more able to advance them within your agency.

*Rounding out the top 3 are communication of priorities, coordination across organization boundaries, and performance assessment and consequences.
June 20, 2012

Pennsylvania Takes on UI Solvency with New Legislation

On June 12th, Pennsylvania Governor Tom Corbett signed comprehensive UI trust fund solvency legislation that included a range of measures to address the deficit in the state’s UI Trust Fund account. Tackling the issue through a combination of bond authority, special tax assessments, benefit cuts and integrity measures, the new laws amended the former Unemployment Compensation law to:

  • Change partial benefit credits from 40 percent to 30 percent of the weekly benefit rate
  • Stipulate that earnings for requalification of benefits must be in “employment”
  • Increase the taxable wage base and decrease the State Adjustment Factor
  • Change Interest Factor to bond debt repayment mechanism
  • Increase trigger solvency percentage to 250 percent
  • Enact various administrative changes, including allowing the collection of back payments through Treasury Offset Program
  • Change financial eligibility requirements in base year earnings
  • Permit the PA Economic Development Financing Authority to issue bonds for payment of federal loans to Unemployment Compensation Trust Fund
  • Change maximum benefit cap to maintain annual maximum benefit at $573 through 2019
  • Create an amnesty program for collection of unpaid contributions or compensation overpayment

Following a pattern set out by several other states in which UI trust fund accounts are deeply in deficit, the new law seeks to align annual benefit payouts with taxes received from employers over time. The new law will also manage the large outstanding Title XII debt to the federal government through bonds. This should minimize the cost of interest due on the loans, and the FUTA credit reduction penalties that would have resulted from outstanding payments.

To learn more about how UST can help your nonprofit in Pennsylvania, or any other state, save money by streamlining UI costs and better managing improper and fraudulent claims, visit for a savings evaluation today!
June 06, 2012

In-House Employee Development

In almost every nonprofit setting, it’s pretty safe to say that leadership requires the most out of every employee to create the greatest possible impact on the governing mission. Whether this means that case workers take emergency calls from clients more than they are schedule to, or that an administrative assistant wears multiple hats as the social media coordinator, office manager, event planner, and even an intake specialist, continually changes. But, despite the great pressure nonprofits place on each employee to give their absolute best, employee development is often overlooked.

A recent Bridgespan Group survey has revealed that most nonprofits rank their ability to provide development and growth opportunities to employees as their fourth greatest management weakness overall even.*

The same survey went on to explain that a lack of employee development has become the “Achilles heel” of the nonprofit community. Because only 30 percent of nonprofits have created or sustained an agency-wide plan for employee development—and only 23 percent of those track its progress—the large majority of organizations don’t have a clear understanding of what skills they need for each position as their mission evolves. Many more don’t even have an idea of where that talent would come from.

To help you develop a plan to address future leadership gaps, Bridgespan put together a list of 52 free ways that nonprofit agencies can improve their internal employee development. Some of the easiest and most impactful employee development initiatives that they list include:

  • To prepare employees for positions of team leadership and management, have key employees lead monthly meetings
  • Allow potential future leaders to manage junior staff such as interns or volunteers
  • Organize and execute team building activities at monthly meetings
  • Allow key employees to represent the organization in professional or community networks
  • Ask employees you want to develop to participate in drafting portions of grants or business contracts to improve their business capabilities
  • Have staff participate in developing key budgets
  • Ask staff to organize initiatives throughout the organization or in the community

On its own, on-the-job development isn’t enough though. To foster truly effective options for employee and organization development, get your board involved with individual employees through the agency. And have each person who is involved with your development program—whether that is a board member or a developing leader—regularly assess what works best at getting employees ready so that you are more likely and more able to advance them within your agency.

*Rounding out the top 3 are communication of priorities, coordination across organization boundaries, and performance assessment and consequences.
May 20, 2012

Creating an Open Door Policy

When your best employees leave your agency, the turnover can easily leave you in the lurch, but is there a way for you to give them the option of coming back if their new position doesn’t work out as well as they’d hoped?

Many human resources professionals enthusiastically say yes.

Now, more than ever, when employee pools are glutted with workers it is difficult for employees who have left a nonprofit- even if they know they were highly valued- to ask for a job back, even if it’s only been a few weeks and they know that no one has been hired or promoted to replace them.

By extending an informal verbal invitation to the employee in their exit interview – during which you can learn some of the most valuable feedback about how your organization treats employees and how that affects employee retention – you can create an open door policy that shelters your employee (and you!) if their new position doesn’t work out.

While not every employee should be offered your agency’s open door policy, employees who have excelled and successfully propelled your agency forward are an asset you worked hard to develop, and they should be treated as such. Because it takes time and resources to develop a new employee, which can hurt your overall mission if the match doesn’t work out, it is always easiest to keep the employees you have.

When extending the invitation, make sure to keep certain criteria in mind:

Does this employee have a proven track record of productivity?

Are they dependable?

Will it be hard for you to fill their position after they leave?

Have they developed strong working relationships with other people throughout your nonprofit?

Would their return be welcome?

For employees who leave a job and then find that their new position isn’t nearly as satisfying as their old position, an open door policy and a personal invitation to come back if it doesn’t work out creates a strong sense of community that, even if they don’t come back to your agency, they will reflect back on your agency in the way they talk about you.

Read more about how one organization’s open door policy has benefited them here.
May 14, 2012

SIDES Program Standardizes Separation Data Needed to Defend against Fraudulent Unemployment Claims

In mid-2011, a new unemployment claims processing system, called the State Information Data Exchange System (SIDES), was introduced. A secure, web based, electronic transmission system enabling two-way data exchange with state unemployment agencies, the finalized program has established a uniform means, between states, employers and employer representatives, for gathering separation information for unemployment claims. Creating this standard expectation of information for all participating states is important because it helps eliminate questions about what details are needed to submit a complete and effective response on a contestable unemployment claim.

Knowing exactly what separation details will be needed in response to the state and having the increased lead time needed to gather that information enables nonprofits to win more claims at the initial level of protest. This is especially important to nonprofit employers where winning claims up-front helps lower claim costs by eliminating benefit payments to former employees while waiting for an unemployment hearing to be scheduled.

Electronic receipt of claims notifications through SIDES also helps reduce follow up time, as a complete response is provided as part of each “first response.”

Ultimately, the program reduces improper payments, since the states are provided with all of the details needed to make the correct ruling in the initial determination. As a result, participation in SIDES saves both time and money.

For nonprofit employers, reducing the high costs associated with unproductive former employees helps increase the funds available to help others and attain organizational goals.

Some of the biggest benefits to nonprofits include:

  • A standard claim response format for participating states
  • More lead time to prepare and submit employee separation details
  • Lead time on claim availability to nonprofits increased by an average of 3 days
  • Reduced benefit overpayments and inappropriate charges
  • Employee information is secured through a reduction of paper documents

UST’s claims monitor, TALX, has been involved with SIDES from its inception and is one of only two forward-looking unemployment cost control organizations utilizing the program to help 501(c)(3) members reap the benefits of this improved claims process.The program has been successful, thus far, and TALX is now live with SIDES in 10 states (AZ, CO, GA, IA, OH, RI, SC, TX, UT, WI). An additional 10 states are expected to go live by the end of August, with 21 more going live by the end of the year. There are 9 states that have not yet made a commitment to participating in SIDES.

If you are a UST member, please contact your TALX representative to learn more about SIDES.
April 30, 2012

Hiring the Perfect Candidate: Checking References

Hiring the perfect candidate sometimes seems like it has 1,001 steps. Between sorting through all of the resumes, doing phone interviews, conducting in-person interviews, and letting those passed over down in a way that makes them more likely to apply again later, it’s easy to forget that hidden in there is one of the most important steps to making sure you do get the right person for the job.

In this day and age, the reference check has become much more than a mere formality. Shedding light on what a candidate is really like, calling references and verifying former positions and educational history helps enlighten the hiring team as to what the best, and sometimes worst, parts of working with a particular candidate are.

Underestimating the amount of information you can glean from conducting reference checks is done all too often though. Because it takes significant time and energy to call every reference, it might be easier for some agencies to look at having a third party professional recruiter talk to the references.

If this isn’t a strong option, the key to conducting the most successful reference checks lies in asking, and listening, to carefully developed questions that speak to what you most want, and need, to learn about a candidate. Making the process feel like a conversation- one where you’re up front and open about what the opportunity is and what information you’re looking to learn about the candidate- can lead to valuable revelations that help cement your decision and show you where you can best support and develop a new hire.

When developing your reference check questions, you should look for both hard data, such as questions about the candidates skill set, and qualitative data which will help you better understand the candidate’s communication and management style as well as their strengths and areas for improvement.

Some sample questions might include:

  1. Please tell me a little bit about yourself and your relationship with XX.
  2. What are the personal qualities that most stand out to you about XX?
  3. How has XX impacted your organization/department/campaigns?
  4. Can you tell me about XX’s leadership skills?
  5. How does XX deal with conflict? Does XX tend to be successful in dealing with conflict?
  6. If you did an appraisal of XX, where would you highlight areas for professional development?
  7. Have any particular experiences with XX stood out to you?

Speaking with a broad list of references- personal, professional, and developmental- will help you put together the best possible picture of what a candidate would look like in your organization. Since few candidates will put down anyone that would give a less-than-stellar review of them and their abilities, drill down deep into how the reference talks about the candidate and their level of enthusiasm about your candidate for the most telling information.

Thankfully, after all of the reference checks are done, if the candidate still matches your expectations, you can finally make your offer.

Read more about checking candidates’ references.
April 26, 2012

Nonprofits Lead the Pack in Job Retraining

Perhaps thanks to a tough economy in which job-seekers are often unqualified for the few jobs that are actually available, nonprofits are gaining recognition for being ahead of the pack in their move to retrain employees for new positions. Actively teaching job seekers skills that will help them move into new industries, across many sectors of the economy, nonprofits with job retraining programs are helping to lower unemployment related costs.

Placing even more workers than many government-funded programs, as found in this article by The NonProfit Times, the ongoing trend is more than promising to the unemployed.

Instead of being set back by the economy and their lack of government funding, many nonprofits are helping more and more workers, both with and without successful employment histories, find gainful employment by offering high-class workforce readiness programs, new employment training, mock interviews, and resume coaching. Teaching out-of-work job seekers to translate and hone their already established skills into skills for their new positions, the programs are highly successful in getting applicants placed in long-term jobs.

Providing courses and training to applicants of all ages and most backgrounds, the push to re-employ America is strengthening the economy and lowering unemployment insurance taxes for employers

April 23, 2012

The Hidden Costs of High Turnover

Since the recession began, companies laid off millions of employees believing that their bottom line wouldn’t survive if they kept any more than the most skeletal staff onboard. And, as people lost their jobs, nonprofits lost large chunks of their funding.

Things seem to be changing though. Recently economic-focused news outlets, like Bloomberg Businessweek, have been reporting an upswing in hiring trends, lower jobless claims and that companies are re-hiring for many of the positions they previously cut.

Creating hope that the recession may be breathing its last breaths, these reports are also changing the ways employees interact at nonprofits.

Now, even though more people are volunteering with charitable and nonprofit agencies through social media and word-of-mouth, the lack of funding for employee paychecks is causing high turnovers as these employees are offered better paying jobs elsewhere.

For instance, The Chronicle of Philanthropy has found that there is an exceptionally high turnover rate for fundraisers that is costing charities lots- and lots- of money. Finding that most fundraisers are only staying at their jobs for an average of 16 months and are being recruited after only a few months, the direct and indirect costs of finding a replacement are estimated to be $127,650 per fundraiser.

Because demand for fundraisers, and many other nonprofit employees, vastly outstrips the supply of good candidates, the president of Cygnus Applied Research, Penelope Burk, says that she has found that “only 1 out of 3 fundraisers experience[s] even a day without a job.”

In conducting research for a study that is expected to be released this fall, Burk suggests that keeping fundraisers happy can save organizations thousands of dollars. She also suggests that agencies work at promoting their internal talent and offering training opportunities that can make inside people better qualified for assuming new positions.

Just one example of where high turnover is hurting nonprofits, the move to re-train the unemployed for new positions is also affecting nonprofits as many job seekers are requesting courses and training in fields like computers and nursing where they can expect a stable salary.

Operating on already tight budgets, the high rate of turnover at many nonprofits is making it even harder to survive, but by looking for ways to increase employee happiness- whether that means offering more time out of the office or the ability to work from home- more agencies can compete for the best possible candidates.

To find out if job seekers can be re-trained to work for your organization, contact your local unemployment agency or career center.
April 19, 2012

Developing Well-Written Objectives for Each Position Leads to Greater Success for Your Agency

Writing great, to-the-point objectives for all of the jobs at a nonprofit organization is hard. Nearly impossible if you don’t have the right tools or a good understanding of what the positions must do. But, developing these goals is completely necessary for the success of any agency, and for the success of your employees.

Laying out, in writing, what is and isn’t important and how goals are measured gives employees something tangible to look at when they need reassurance or guidance. It means they can align themselves with your team, your department, and your organization without having to learn the hard way what they’re trying to achieve and what they need to do to achieve it.

Developing well-written objectives also helps employees and their managers evaluate performance and react appropriately to organizational changes.

By using the following 7 steps, suggested by The NonProfit Times, you can put together objectives that “leave no doubt to your intentions” for each position.

  • Use action verbs that clearly state what is to be done and what the expected results are.
  • Have results that you, and your employees themselves, can measure. Make them quantifiable, observable, or verifiable.
  • Make sure to include activities and results that are actually in the employee’s control.
  • Assure that targets are realistic, but also challenging.
  • Ask yourself if these objectives support your organizational goal for this role.
  • If possible, involve assignments that help contribute to job responsibilities and address a developmental need.
  • Develop timelines and milestones by which progress can be assessed.

Even when working with well-written objectives, be ready to be flexible in how each employee and their manager approaches them. While organizational understanding of the importance of these objectives is important, it’s just as important to be ready to roll with the punches that come day to day and to re-evaluate your objectives as needed.

Tweet us @USTTrust: What steps do you take when developing, or re-developing, employee objectives?
April 16, 2012

1 in 4 Nonprofits are Unaware of Unemployment Insurance Savings Option Available Exclusively to 501(c)(3) Agencies

22% of nonprofits are unaware of a critical piece of federal legislation that allows them to opt out of their state tax-rated unemployment system and pay only for their own unemployment claims, found the Division of Nonprofit Research at UST in its most comprehensive market research study to-date.

This option, which has been available exclusively to 501(c)(3) organizations since 1972, allows nonprofits to stop over paying into their state tax-rated system and offers substantial long-term savings for those employers who choose to become direct, or self-, reimbursing agencies.

“Our state has increased its costs to most employers so I’m shocked that not all nonprofits are looking at this option,” said one study participant who has already opted out of their state unemployment insurance system.

By opting out of the state tax-rated system, which typically causes employers to pay $2.00 in taxes for every $1.00 in actual benefits that is paid to their former employees, most nonprofits are able to save money and do significantly more with their budget.

“It wasn’t until after my first full year with UST that I started to believe it was not too good to be true. We received our audit and a refund and I thought ‘Wow, we really have a credit here,’” wrote another study participant.

Offering valuable savings in both the short and long-term, opting out of the state system does have several drawbacks for agencies that elect to become direct reimbursing without joining a trust like UST or other program.
  • Cash flow volatility when unexpected claims arise
  • State overpayments made in error
  • Difficulty in monitoring for fraudulent claims

“I’m always looking to save money and get more services for my clients,” said one nonprofit HR consultant, “I push the idea of UST for giving them an added resource. [With UST] They’ll have somebody on their side who can help them.”

To read the online press release about the Division’s findings, go here.

All information and quoted materials were pulled from a study conducted at UST, which was released at the end of the 1st quarter of 2012. The study surveyed almost 300 nonprofit agencies to identify key data about how nonprofits understand and utilize their unemployment tax options
April 08, 2012

Stepping Up Social Media and Improving Infographics Help Nonprofits

Social media has taken over millions of nonprofits. It provides a cheap, easy way for agencies working on a limited budget to reach their target audience and build new contacts. And, it can be one of the most effective ways for nonprofits to spread word about what they do and how they do it.

Recent reports show that despite shrinking budgets, and extensive staffing challenges across the board, nonprofits are still finding value in growing their social networks. According to one blogger, recent studies have found that:

  • 98% of nonprofit agencies have a Facebook page with an average community size of over 8000 fans.
  • Average Facebook and Twitter communities grew by 30 and 81% respectively.
  • Average value of a Facebook “like” is $214.81 over the 12 months following acquisition.
  • 73% allocate half of a full-time employee to managing their social networking activities.
  • 43% budget $0 for their social networking activities.
  • The top 3 factors most nonprofits are using to gauge the success of their social media are: strategy, prioritization, and dedicated staff.

Statistics compiled by Katya’s Non-profit Marketing Blog

But still, social media presents some distinctive challenges for nonprofit organizations.

Because social media provides captive audiences with thousands of attention-grabbing options, nonprofits have to find quick, easy ways to distribute their information and to keep fans engaged. Using interesting infographics goes a long way to keeping your audience aware and involved with a nonprofit mission though.

Innovative and easy to digest, infographics combine key

facts, compelling stories, and interesting imagery that work to start conversations both online and off. “Good visualizations can also help charities better understand their own data and use those insights to improve their programs,” said Jake Porway, founder of Data without Borders, in an article published by The Chronicle of Philanthropy.

By sharing simple messages that can be understood with little or no prior knowledge of the subject matter, nonprofits are finding that they can easily improve their operations and increase their reach.

For more examples of well received infographics and tips on how to make your own, read the full article on The Chronicle of Philanthropy.
April 05, 2012

Hiring Toolkits Help Nonprofit Agencies Find the Best Employees Around

Bridgestar, an initiative of The Bridgespan Group, has created a Hiring Toolkit to help nonprofits better enhance their internal effectiveness and more quickly fill new and recently opened employee positions.

After a study conducted by Nonprofit HR Solutions reported that43% of nonprofits are expecting to add to their staff in 2012, as reported in our March 26th post, it is becoming increasingly important that nonprofit hiring teams are thoughtful and proactive in developing their own hiring toolkit.

Hiring toolkits help nonprofit hiring teams draft the strongest job descriptions, write the most compelling job ad, and outline how to select the best candidate. But, most importantly, they strengthen agencies abilities to compete with for-profit companies who are offering similar positions at typically higher pay rates.

Because the findings of the Nonprofit HR Solutions study “suggest that the nonprofit sector should be more focused on retention practices than it is currently,” it is even more vital that hiring teams know exactly who and what they are looking for when reading through stacks of resumes and applications.

Bridgestar suggests that hiring teams create a system for reviewing resumes to improve the chances of including “the most relevant candidates” and “uncovering those hidden gems.” To do this, they’ve offered 4 reviewing steps:

Step 1: Agree on your resume review process and how each team member is going to be involved before looking at any application packets.

Step 2: Organize the cover letters and resumes you receive in order of receipt to speed the reviewing process. Let the candidates know that you have received their resume and will be beginning your review process shortly.

Step 3: Review each resume packet thoughtfully and objectively. Knowing what core criteria are most important for you, and where you are willing to bring a candidate up to speed helps process resumes; similarly providing the review team with key questions to keep in mind when reading each resume helps sort through applicants who aren’t adequately qualified or don’t fit your mission.

Step 4: Make the interview decision and let applicants who are not selected down easy. For applicants the hiring team wants to speak with further, discuss what more should be learned about them in phone, and eventually, in-person interviews.

As the nonprofit job market grows stronger and more job opportunities are being created across all sectors, agencies must be more competitive in selecting and retaining qualified applicants. Read more about Bridgestar’s suggestions for Processing Applications and Screening Resumes.


March 27, 2012

DOL Helps Businesses Fight Unemployment Fraud

After the Wall Street Journal reported more than $5 billion dollars in unemployment benefit overpayments by states from July 2010 to June 2011, more eyes have been fixated on fraudulent and inaccurate unemployment benefits. The overpayments are a result of many factors, including the fact that no two states have the same regulations or policies in place to determine unemployment benefit eligibility. Those state with complex provisions often have higher errors. The U.S. Department of Labor (DOL) is perhaps the most cognizant of these errors - and is cracking down on mistakes and fraud.

On March 14, the DOL announced new tools to help states detect and recover improper unemployment insurance (UI) payments as well as fight UI fraud.

The new online tool is called the Fraud Tips and Leads Gateway and it gives any user the ability to report fraud. Essentially, the DOL is putting power into the hands of the people to help lower fraud and overpayments. It will help states act quickly to investigate tips and leads as well as prosecute fraudulent claims. The DOL is also publishing new, simplified materials that highlight the most common mistakes made by claimants. And for businesses, the materials offer instructions on how to avoid the negative tax implications of wrongful claims.

Said Secretary of Labor Hilda L. Solis. "Too many people don't know their responsibilities under the program, and too many businesses don't know what's at stake for them, especially the tax implications. The tools announced today will help educate consumers and businesses, and ultimately improve the UI system."

To get these tools into the hands of the public, the department is working with states and through the workforce system to broadly display these materials in public areas and to post them online, says SHRM, the Society for Human Resource Management.

These new resources are expected to help cut down on the billions overpaid, and ultimately help businesses reduce the UI tax rates they pay to the state. The DOL also announced $192 million in grant funds to implement waste-cutting initiatives and improve the UI system. It is expected that these efforts combined will help reduce fraud and overpayments, and potentially save state governments and businesses millions of dollars.

View the DOL map of improper payments by states and find out about the new toolsHERE.

Read the DOL's fact sheet: "Are You Doing Everything to Protect Your Business from Higher Taxes".
January 19, 2012

The New Nonprofit Employee

According to many recent reports and articles, turnover may be the new normal for NPOs. In a society where the average number of careers changes in a person's lifetime is reportedly 5-7, this may not be shocking news. But recent turmoil in nonprofit hiring and employee satisfaction has nonprofit leaders in a quandary. Can we embrace this new normal but also shift our practices to increase employee satisfaction?

According to the Chronicle of Philanthropy: "Four out of five charity workers are actively seeking new positions—or would be if the economy were stronger, according to the survey of 672 people. Nearly 40 percent of employees said they are dissatisfied with their work."

Much of the dissatisfaction is a result of the economy adding new pressures to employee workload. With fewer employees to do the same amount of work or more, positions are becoming less specific and more generalized, giving employees little sense of accomplishment or ownership over their work. In addition, loss of a sense of job security has given many nonprofit workers reason to seek employment elsewhere. Finally, under-appreciation of employees has set them up to under-achieve and potentially just leave.

Joanne Fritz, writer for the Guide for nonprofits, says in her recent post: "What these employees want is what all workers want, whatever sector they work for: professional development, the chance to advance, clear expectations from managers, participation in the decisions that affect them, and a feeling of being valued."

If the nonprofit sector is going to thrive in this new normal, the new nonprofit employee will need more out of their position than just the feel-good nature of their work. Leaders and human resource professionals at these organizations will need to:

1. Provide Education. Giving employees a chance to hone their skills and build management know-how will not only give them a sense of relevance and job security, but it will refresh your NPO's overall strategies and outlook.

2. Recruit Wisely. "Make employee recruitment an ongoing activity" says Fritz, so that your organization stays aloft regardless of turnover. And to reduce turnover, new tools like online assessment tests can help ensure you're finding the right candidates.

3. Give Feedback. Being involved in your employees' performance, providing rewards and discipline, helps them feel like they are part of a greater mission. By documenting performance, you can also save your organization from suffering from inappropriate unemployment claim costs down the line.

4. Embrace Technology. Giving employees opportunities to work from home with cloud technology and utilizing new online and social media tactics will help employees feel they are working for an organization that stays ahead of the curve and appreciates new ideas.

5. Be Flexible. When compensation dollars are limited, you can boost morale by using other incentives like quality of work life rewards and training opportunities.

December 07, 2011

Surviving in the New Nonprofit World: A Multi-Dimensional Approach

Nonprofits who rely on state and other government funding should prepare for a bumpy road ahead in the next couple years says a new report produced by independent philanthropy consulting firm “Changing Our World, Inc.” Although the economy is seeing a shift toward the positive, state tax revenue – and therefore funding for many nonprofits - is nowhere near stable. And while the number of nonprofits has been steadily rising over the past 15 years, charitable giving has dipped significantly and would need an unprecedented rally to make up for the government funding shortfall.

Since World War II, the average recession in America had lasted 10 months. Until Now.”

Unemployment alone has created a crisis in many states. In fact, 44 “crisis states” have significantly reduced spending and are expected to cut spending even more (by $38.5 million) in social services, education and Medicaid says the report. Despite $1.5 trillion of American household wealth lost in just the first three months of the recession, philanthropy on the other hand, has been making modest gains and is expected to slowly trend upward. But the dollars are spread thinner as the number of nonprofits increases and the demand for services explodes. As the Chronicle of Philanthropy put it: "To help nonprofits cover cuts in those services, households in the hardest-hit states would have to step up their giving by 30 percent in 2011 and 60 percent in 2012—an increase the report says would be 'historically unprecedented.'"

So what’s a nonprofit to do?

The report concludes that a multi-faceted strategy is needed for every nonprofit. Waiting on philanthropy or government funding to recover won’t work. “Philanthropy will be an important, indeed critical piece of that strategy, in part because philanthropy is often flexible and can fill in gaps not financeable through other means. However, the sheer weight of the burden will require that multiple revenue pathways be opened as well as that every managerial option for efficiency be considered.”

For nonprofits looking for a guide to this multi-pronged approach, we gleaned these tips from the report:

Efficiency – Reach out to unemployed workers to become volunteers, possibly with a stipend. You’ll not only give them a step in the right direction but you’ll receive valuable man-hours.

Collaboration – Reducing overhead costs is possible through a number of collaborative efforts like merging of back offices, joint purchase of property, combination of nonprofits with similar programs into a single service network, etc.

Messaging - When asking for donations, emphasize progress instead of crisis. Talk about all the good the organization is doing in the face of the economic crisis, not how it’s struggling.

Financial Expertise – Learn more about managing cash flow and accounts receivable so you can weather late payments and financial dips. Become your own expert on economic trends. Also think about adding people to the board with financial expertise or government experience.

Don’t Rely on One Source - No more than 60% of any program’s budget should come from government money.

Maintain a Reserve - This fund should be triggered only by the Board or the Finance Committee, and saved for lean times.

December 05, 2011

Aging Services of Georgia Teams with Unemployment Services Trust to Reduce Operations Expenses for Nonprofits

SUMMARY:  Partnership provides potential savings for nonprofits in Georgia during times of rising costs, reports the Unemployment Services Trust.

Santa Barbara, CA.  December 06, 2011 - The Unemployment Services Trust (UST) and Aging Services of Georgia are pleased to announce they are entering into a partnership to offer a new member benefit to nonprofits in Georgia: saving money on unemployment expenses.

Aging Services of Georgia is a statewide association that represents nonprofit and mission-driven organizations dedicated to providing quality housing, health care and community-based services.  Aging Services of Georgia consists of over 150 housing and service providers that proudly embrace the continuum of aging services, representing over 126,000 residents and clients in Georgia.

With Unemployment Insurance (UI) taxes continuing to rise across the United States, it works to the benefit of most nonprofit organizations to consider opting out of the state unemployment tax system in an effort to reduce operational costs.  The current maximum tax rate for employers in Georgia is 7.29%, up from 5.40% in 2008, and these rates will continue to rise until the economy stabilizes.  Opting out of the state unemployment tax system is allowed by federal law for 501(c)(3) organizations and can help nonprofits keep more funds to put toward their mission.

Employers who pay into the state unemployment tax system typically pay in $2.00 for every $1.00 for paid out in benefits.  And, last year alone, Georgia erroneously paid out unemployment benefits by an estimated $53.6 million, so there are a lot of funds going to waste.  Opting out classifies nonprofits as a direct reimbursing employer, where the organization repays the state dollar-for-dollar when an unemployment claim is filed against the organization.  In becoming a direct reimbursing employer, organizations have the options to monitor and protest claims on their own or join an unemployment trust.  Handling unemployment claims within the organization can be burdensome on Human Resources departments, so many nonprofits choose to join an unemployment trust because they can provide claims monitoring services as a benefit of becoming a member.  With UST, organizations make quarterly deposits into a reserve account that is owned by the organization.  When unemployment claims arise, UST reimburses the state with funds from the organization’s reserve, which will be replenished through future contributions.

UST, a grantor trust founded in 1983 by nonprofits for nonprofits, is the largest national unemployment trust with more than 2,000 member organizations.  UST’s long-standing association with 501(c)(3) nonprofit organizations provides an average annual savings of $35 million in claims and has provided over $33 million in refunds to trust members.

For more information about UST, visit or call (888) 249-4788.  You can also visit Aging Services of Georgia on the web at

December 04, 2011

5 Ways To Increase Nonprofit Sustainability

You've already tightened your belt. But now constrained public funding and highly competitive government grants are making sustainability harder than ever for nonprofits, especially those in the human services sector. We think this recent article from the Stanford Social Innovation Review is a great read for nonprofits suffering from funding cutbacks. The article provides guidelines on how to stay afloat during these times, including these five ideas:

1) The importance of strategic clarity and the steps your organization should take to focus on priorities

Nonprofits across the globe offer a wide variety of services. Defining how, where and with whom you have an impact will assist you in finding your niche, and also help you with your funding efforts. From here, nonprofits should define how much it costs to provide each service offered by the organization so you can seek the proper funding needed to keep the program afloat. This allows the agency to locate areas of service that may be altered if funds are lacking and show what areas of the service would benefit the most if funding were increased. Also, focusing on strategic clarity aids the organization in decision making and how you can pursue opportunities for government funding.

2) Diversifying government support streams and how to manage a strapped funding environment

Organizational sustainability is of the utmost importance, so it is imperative that organizations not have all of their funds coming from just one source. Allowing funds to funnel in through multiple sources (government agencies, state programs, donors) can help your organization remain stable amid declining revenues. Nonprofits may consider offering services in different locations or offering their services to others who may benefit from them (for example, offering services for children with behavioral disorders in a school setting, to children with behavioral disorders in foster homes). Organizations can also take contracts that may not cover all of the costs involved with a particular service if there is potential for making up the difference in community support.

3) Improving productivity, efficiency and effectiveness

A notable difference between the for-profit and nonprofit market place is that nonprofit organizations rarely get to name their price when trying to earn a contract. And, since the funds provided don’t always cover the costs required to carryout the work needed, nonprofits find themselves trying to work more efficiently and effectively in order to preserve funds for the future. Many organizations are becoming more tech-savvy and investing in technologies that streamline job processes and free up valuable man hours so they can focus more on “big picture” tasks.

4) Measuring outcomes and utilizing reports to drive internal learning

Many times, nonprofit organizations generate reports to show the results of their efforts to external parties in order to prove they are satisfying funder requirements, government expectations, etc. Measuring outcomes can be a valuable tool in educating internal associates of program productivity and how certain aspects of those programs can be tweaked in order to improve results. Measuring outcomes can also show whether or not a certain program is producing its intended results, ultimately aiding in overall organizational sustainability.

5) Moving beyond “vendorism” and viewing government decision makers as customers

When nonprofit organizations work with government decision makers, keeping in mind that the government is the buyer and the nonprofit is the seller, nonprofits can better position themselves to mold the government’s request for proposals. As Patrick Lawler, CEO of Youth Villages, stated, “We find out where the leadership’s biggest needs and challenges are, and then look at what services we have that can help them solve the problem. We look over every word in new state budgets and the statements made by the governor or head of child welfare services, and put together a plan for how to address the needs identified.”

November 29, 2011

3 Steps to Building a Reserve for your Nonprofit

"If there is one lesson the nonprofit sector has learned in the past few years, it is the value of maintaining healthy reserves,” says Hilda Polanco in a recent article from Philanthropy Journal.

Here at UST, where we help our members create reserves to pay unemployment claims, we couldn’t agree more.

But finding those unrestricted dollars to fund a reserve is easier said than done. However, it is a necessary step in managing sustainability – a lesson all too clear to many nonprofits during the recent economic downturn. Ms. Polanco provides some insight into how nonprofits can start building their operating reserve. Here is what we learned:

1. Start with nurturing a culture (all the way up to the Board) that strives to produce revenue and surpluses – not just “breaking even”

2. Next, when creating your budget, insert a line-item for “Current Year Contribution to Reserves” so that it is a clear priority for both management and staff.

3. Finally, there must be a reserve policy that states when reserves should be accessed, and defines “when is it a ‘rainy day’?” or “what constitutes an emergency?” This will provide the purpose of the reserves based on your organization’s own individual mission.

Overall, says Polanco, the board should figure out “how much of its unrestricted net assets to make available for management to use as needed ("Operating Reserve"), how much to set aside for a rainy day ("Board Designated") and how much to earmark for a specific strategic goal ("Special Purpose").” A reserve is not something that will appear overnight, but by taking these few steps your nonprofit will be on its way toward being a stronger, more stable organization.

November 20, 2011

Employers in Twenty-One States to See Tax Rates Rise

SUMMARY: Businesses in states with unemployment funds remaining in a deficit for two consecutive years will not receive the benefit of FUTA tax credit, spelling higher taxes for employers, reports the Unemployment Services Trust.

Santa Barbara, CA. November 21, 2011 -- With chronic unemployment lingering across the U.S., many state unemployment funds are long past being able to support laid off workers without the help of Uncle Sam. These states, whose unemployment funds were depleted during the recession, took out Title XII loans from the federal government to continue paying unemployment benefits. Now with current outstanding balances totaling $37.4 billion, the Fed is eager to see some of this money paid pack. Based on Title XII of the Social Security Act, employers will be tapped for these funds through a FUTA credit reduction, reports the Unemployment Services Trust (UST).

Under the Federal Unemployment Tax Act (FUTA), typically employers pay an annual FUTA tax rate of only 0.6% because the 6.0% tax rate is offset by a federal credit of 5.4%. (The tax was 6.2% for a net tax of 0.8% previously; but the 0.2% surtax passed by Congress in 1976 finally expired June 30, 2011). However, by law, after a state has had an outstanding Title XII loan balance for two consecutive years on January 1, employers in that state face a 0.30% reduction in the FUTA credit if the loan is not paid back by November 10 of that same year. In 2010, three states had outstanding balances for more than two years that could not be paid back by the November deadline. Indiana, Michigan and South Carolina employers saw their FUTA tax rate go up by 0.3% retroactive to January of 2010 because of the credit reduction. Now, a year later, seven times as many states face a FUTA credit reduction. Employers in 21 states will see their federal unemployment taxes rise this year.

- Nineteen new states will have a credit reduction of 0.3%: Arkansas, California, Connecticut, Florida, Georgia, Illinois, Kentucky, Minnesota, Missouri, North Carolina, New Jersey, Nevada, New York, Ohio, Pennsylvania, Rhode Island, Virginia, Virgin Islands and Wisconsin.

- Michigan will have a total credit reduction of 0.9% (0.6% in 2010)

- Indiana will have a total credit reduction of 0.6% (0.3% in 2010)

- South Carolina qualified for credit reduction avoidance, so they will not have a further credit reduction for 2011.

This means that for employers in the 19 states newly experiencing this credit reduction, the federal unemployment tax rate will increase from a net 0.60% to 0.90%. These taxes will be due in January 2012 based on the first $7,000 of wages paid to each worker, retroactive to January 2011. So while other employers pay $42 per employee in federal unemployment taxes, employers in credit-reduced states will now pay $63 per employee.

For each subsequent year that the loans remain unpaid, employers will see a further 0.3% credit reduction. By 2014, they could face a 1.8% net federal tax rate if the state still has not paid back the loan. This year Michigan will see a net tax rate of 1.7% and Indiana will face 1.4% because of their prolonged outstanding loan balance. The federal FUTA tax is paid in addition to the state unemployment taxes that each employer pays on a quarterly basis.

The widespread credit reduction means that more employers will be wary of hiring as they seek to reduce costs – further compounding the unemployment problem. Only 501(c)(3) organizations are exempt from FUTA taxes. However, even these nonprofit organizations could feel the effects in the form of increased state unemployment taxes. In an effort to pay back their outstanding loans, many states will increase their unemployment taxes and taxable wage bases over the coming years as well. Already in 2010 employers saw a 34% national average tax hike, followed by an expected 16% again this year – and these tax rates won’t likely go back down again.

State unemployment funds have been historically under-funded, which is how they got here in the first place. For example, from 1938 to 1973 unemployment reserves lingered around 5% of wages, never dropping below 2%. That average fell to 1% in 1974 and hasn’t reached 2% ever since, meaning state UI funds have had the slimmest of financial buffers, let alone a buffer that could withstand a prolonged surge in unemployment like the one caused by the recent recession.

Even though states have tried to find ways to pay back their Title XII loans (and the $1.3 billion in interest that was due starting on September 30, 2011) without increasing taxes on employers, they are only putting off the inevitable. For example, debt-laden California appropriated money from its General Fund to pay the interest due on its loan instead of raising taxes on employers. This was a common practice among many states this year. While employers can thank the state for now, the fact still remains that the California taxable wage base is only $7,000, which is the lowest possible taxable wage base (states must match or exceed the federal taxable wage base to avoid substantially higher FUTA rates). They are among the 32 states whose taxable wage base remains below $15,000. There is a proposed increase in the FUTA taxable wage base for 2014, however, that would increase the minimum to $15,000 for all states. California taxes could more than double if the proposal passes. This is just one example of how states that have put off raising taxes for decades could face a substantial “correction.” Hawaii employers, who were shocked by a record taxable wage base increase of $21,200 last year (from $13,000 to $34,200) would probably agree that this type of sudden rise in taxes is hardly desirable. But it will be necessary if states cannot adjust their unemployment fund practices to pay off their loans and create sustainable reserves.

In the short term, states will have to make immense efforts this year to avoid another credit reduction for employers in November 2012. According to the DOL, to avoid a FUTA credit reduction for a taxable year, a state must submit an application to the Secretary of Labor prior to July 1st, and the state must:

- Pay the amount that the credit reduction would produce prior to November 10th of the year for which avoidance is to apply

- Repay all loans received during the one-year period prior to November 10th

- Increase solvency for the taxable year through legislative action by an amount equal to or greater than the amount of the FUTA credit reduction

- Not borrow before the next January 31st

November 09, 2011

Employers Could See State Unemployment Tax Rates Double With Proposed FUTA Wage Base Increase – Nonprofits Have Options

SUMMARY: The proposed FUTA taxable wage base increase would have a heavy impact on employer rates, reports the Unemployment Services Trust.

Santa Barbara, CA (PRWEB) November 10, 2011 -- With most state unemployment funds now defunct after being depleted faster than they could be replenished during the recent recession, many states have found themselves with deficits that are growing as time passes. The United States unemployment tax system is in need of some serious restructuring, and it appears that the road out of the red is not a pretty one. Now, it’s ‘all eyes ahead’ through the thick of high unemployment, increased tax rates and special assessments. But, looking ahead to 2014, the proposed increase in the FUTA (Federal Unemployment Tax Act) taxable wage base from the current $7,000 to more than double at $15,000, could be devastating to employers if the proposal goes through, reports the Unemployment Services Trust (UST).

The proposal also includes a cut to the net FUTA tax rate from 0.80% to 0.38%, reducing the percentage by more than half. With the FUTA tax currently set at $56 per employee per year (0.008 x $7,000 = $56), and the proposed tax to be set at $57 per employee per year (0.0038 x $15,000 = $57), at first glance the change may seem trivial. The federal level, though, is not where employers would feel the pinch.

The pinch is found in the fact that states will have to match or exceed the FUTA $15,000 wage base, or face substantially higher FUTA rates. Thirty-two states (as well as Washington D.C . and Puerto Rico) would need to increase their unemployment taxable wage bases. There are currently 20 states with taxable wage bases of $10,000 or lower. The last time that the UI wage base increased was in 1983, so the increase is long overdue. However, it is expected that employers in these states will likely pay fifty percent more state UI taxes beginning in 2014 if the proposal is enacted.

Employers in states like California, who currently have a taxable wage base of $7,000, and for example, have an unemployment tax rate of 4.0%, will see their cost per employee increase from $280 to $600 annually. An increase this large (114%) would be detrimental to many employers, but especially nonprofit organizations, which typically have a tough time raising funds to cover operational expenses to begin with.

For 501(c)(3) organizations, federal law allows organizations to opt out of the state unemployment tax system and instead reimburse the state only for their own workers’ unemployment claims, dollar-for-dollar. When paying into the unemployment tax system, companies across the U.S. pay an average $2.00 for every $1.00 paid out in benefits, and these dollar amounts will likely grow where taxable wage bases will be increasing.

It should be noted, however, that nonprofits may find opting out of the state unemployment tax system to be burdensome on their HR department since they must monitor unemployment claims more closely, both to make sure they are not paying for unwarranted claims and also to ensure they have the funds on hand whenever a claim is filed. Some nonprofits have chosen to join an unemployment trust to help monitor claims, set aside funds in an account, and get support for their human resources department. For more information about joining an unemployment trust, visit

November 07, 2011

How HR Can Help Reduce Operational Costs as Jobless Claims Rise

Unemployment claims can negatively affect employer tax rates for several years and be especially burdensome to small businesses and nonprofits. Standard claims can increase an organization’s unemployment insurance (UI) costs by $4,000 - $7,000 over a three year timeframe. A recent article published by the New York Times quoted employment lawyer David Blaine, saying, “Hiring the right people is the first step in managing unemployment costs.” However, if any problems occur after the point of hire, they should be handled with a system of well-documented disciplinary actions: warnings, suspensions, and termination.

Upon terminating an employee after repeated verbal warnings for misconduct, Dr. Lisa Faast, owner of Faast Pharmacy lost an unemployment hearing for failing to properly document warnings to the employee. “Now, every discussion we have with an employee is written down, and we and the employee sign it. It can get kind of ridiculous. But since we’ve started that, we’ve won every case,” she stated in the NY Times article.

Here are some ways HR managers can help impact their unemployment costs through proper documentation and staying on top of claims:

- Workers who separate with the company voluntarily should be asked to give written notice of the separation in order to avoid a later unemployment claim.

- An employee fired for misconduct can be denied unemployment benefits; one fired for incompetence can collect. So make sure written warnings show that an employee broke a rule they knew about, if they did.

- Small business owners should monitor their UI statements as government numbers show that in 2010, 11.2% of UI benefits were paid out erroneously.

- Hire a claims monitor (or join a trust as a nonprofit) to get help auditing these statements and contesting inappropriate claims. Or if you go it alone, make sure to bring all documentation to hearings and be prepared.

October 14, 2011

Overpayments and Tax Hikes Have More Nonprofits Leaving their State Unemployment Systems

SUMMARY: New data shows billions of dollars in unemployment benefits were paid in error over the last three years, and now businesses are being required to help pay down their state’s unemployment debt through increased taxes. As a result, the Unemployment Services Trust reports a 22% increase in nonprofits evaluating whether they should leave their state unemployment system before the quickly approaching annual deadline.

Santa Barbara, CA, October 14, 2011 -- The Unemployment Services Trust (UST) reports that more nonprofits are exercising their federal right to opt out of the state unemployment tax system just as the DOL releases new data indicating that states overpaid unemployment benefits by nearly $19 billion from June 2008 to June 2011. These overpayments represent an error of more than 10% of the $180 billion paid out in jobless benefits. It’s an unfortunate statistic since employers pay taxes to fund these benefits, and now the same employers are facing special assessment fees and higher taxes to help pay down loans their states took when their funds went into a deficit. This new outlook, along with a November 30 deadline, has many nonprofit employers suddenly looking at their alternatives.

In the long run, the onus lies on both states and businesses to make efforts to reduce these overpayments, explains UST. Most erroneous payments made by states are due to: recipients continuing to collect benefits after they find work, recipients failing to register with state workforce organizations, and employers failing to submit information about employee separation in a timely manner.

However for now, employers will have to pay up. For example, Arkansas owes nearly $360 million in federal loans. Over the past three years, the state has overpaid unemployment benefits by an estimated $161 million, which is 45% of the amount borrowed from the Fed since March 2009. But, these funds are long gone and the debt states are experiencing after taking out loans will ultimately be passed along to employers. Many states have already called for special assessments to begin paying down the interest on the loans, the first payment of which was due September 30. New Jersey, for example, has borrowed $1.05 billion and is asking employers to pay an average of $23 per employee to help settle the state’s debt, which may not sound like much, but for smaller companies and nonprofit organizations who typically work on limited budgets, these costs can add up quickly.

In the nonprofit world, employers with 501(c)(3) status face quite a different scenario, if they choose. They have the alternative of opting out of the unemployment tax system and reimbursing the state dollar-for-dollar when an unemployment claim is filed against the organization. They typically avoid the state tax increases and surcharges, and simply reimburse the state directly for their actual benefit costs. In most states, this option can only be exercised once annually, usually by November 30.

UST, a grantor trust founded by a group of nonprofits to help other nonprofits opt out of their state unemployment tax system, says that being a direct reimbursing employer can help save on operating costs. In addition, becoming a reimbursing employer can also help reduce state unemployment overpayments since employers are more likely to watch their claims closely to ensure they aren’t reimbursing the state for improper claims charges. While examining claims can be more work for HR managers, UST says that there are organizations who can help monitor claims on a nonprofit’s behalf. For example, through the assistance of their own unemployment claims monitoring services, UST’s 2,000 members saved about $38.5 million in 2010, $1.9 million of which were state errors found in audits.

Says Donna Groh, Executive Director of UST: “Already this year we’ve received nearly 250 requests to opt out of the state and join our Trust, which is a 22% increase from this time last year, and they’re continuing to flow in steadily as the deadline to opt out gets closer. It’s not for everyone, but we’re glad to see more nonprofits being proactive about reducing their costs and monitoring their unemployment claims after getting hit with the news about these overpayments and rising state taxes.”

October 10, 2011

Unemployment Overpayments: Fraud or Flawed System?

Unemployment Overpayments: Fraud or flawed system?

By Pamela M. Prah,

View article at

When the Obama administration revealed that more than $17 billion in jobless benefits had been paid out improperly, a stream of headlines suggested that cheats were bilking the unemployment insurance system.

The reality is a lot more complicated, as the U.S. Department of Labor itself noted when it reported state-by-state numbers last month. While fraud was responsible for a small part of the overall “improper payments” figure, much of the total came from less devilish glitches, such as failing to provide proof that a payment went to the right person. The total also included cases where beneficiaries were underpaid, in addition to the cases where the government paid them too much.

Louisiana is one state that has found itself on the defensive. Federal figures showed that 44 percent of its unemployment insurance payments were “improper.”

“The numbers being reported … for Louisiana are not all overpayments,” Curt Eysink, executive director of the Louisiana Workforce Commission, said in a statement. “Nor should those amounts be collectively viewed as ‘waste, fraud and abuse.’” Eysink notes that what the federal government called “overpayments” largely went to unemployed workers who were eligible to receive unemployment benefits; the problem was that the state couldn’t prove that these people had formally registered with the state to say they have searched for jobs.

Crunch time for unemployment insurance

The issue is a sensitive one for state unemployment offices, which have been crushed by heavy workloads as joblessness remains stuck above 9 percent nationally. In the first year of the recession, states saw a 120 percent increase in claims from unemployed workers.

The program, run jointly by the federal government and the states, provides monthly benefits to workers who become unemployed through no fault of their own. Most states have had to borrow money from the federal government to keep checks going to the jobless; last month, states had to start paying interest on those loans.

The stepped-up scrutiny of jobless benefits is part of the Obama administration’s government-wide effort to reduce the $125 billion in “improper payments” the government made in 2010. Unemployment insurance was named one of the “high-error” programs. That was partly because the error rate of 11 percent was more than double the 5 percent rate that the administration set as a doable goal. The enormous size of the program, which paid out $156 billion in benefits last year, also was a factor.

Nationwide, Indiana and Louisiana had the highest error rates, with improper payments accounting for more than 43 percent of the total amount paid in both states. Others that landed high on the list include Arizona (20 percent), Colorado (17 percent) and Virginia (18 percent). There’s no financial penalty for states with high error rates, but until they get their error rates down below 10 percent, they’re subject to greater federal scrutiny and reporting requirements.

States say the federal campaign has left the perception that fraud is primarily to blame for their error rates. In fact, the federal government’s own estimate says that 2.4 percent of unemployment insurance benefits were overpaid due to fraud in 2010.

By and large, factors other than fraud are driving error rates. For example, many of the states under federal scrutiny are experiencing “work search” errors that they say are a result of dramatic changes in how people today file for unemployment benefits and look for jobs. Gone are the days when people had to step into a state unemployment office to fill out the paperwork and sit down with a case worker to talk about which employers they applied to for jobs. Nowadays, unemployment insurance applications and job searches are done online and employers don’t always save the hundreds of résumés they receive electronically.

Kevan Kaighn, of Arizona’s Department of Economic Security, suggests the reporting mechanisms may not have kept up with the times. “Arizona has historically asked employers to confirm that a claimant did apply,” Kaighn says. “If the employer was not able to provide verification … the Department would count the claim as an error.”

Complaints of unfairness

Some states also say they are being faulted for having stricter standards than the feds. Nearly 80 percent of Indiana’s improper payment problem was due to difficulties tracking things that the state requires but the federal government doesn’t. For instance, the unemployed in Indiana must show they have looked for work with three employers. If a recipient lists only one job or lists incomplete information for the other two, those are counted as errors, explains Valerie Kroeger of the state’s Department of Workforce Development.

The U.S. Department of Labor says it has been working with states since last year on these kinds of issues. The department says it’s only fair to assess states based on their own rules, but agrees that the wide variation in state unemployment systems may make it misleading to compare different states on their payment accuracy rates. “States with stringent or complex provisions tend to have higher improper payment rates than those with simpler, more straightforward provisions,” the department says on its website.

The private sector also has a role in improving the accuracy of payment information. One of five overpayments nationwide occurs because the worker’s last employer didn’t provide the state accurate or timely information about layoffs or hiring. The result can be people receiving benefits that they may not be entitled to. “We are trying to get the message out to employers how important this is,” says Joyce Fogg of Virginia’s Employment Commission.

Nationally, the leading cause of overpayments is when once-unemployed workers find jobs and continue to claim jobless benefits. On this front, the Labor Department encourages states to check the information from unemployment claims against a large national database of all new hires. Washington State, which has been doing this for years but nevertheless posted an error rate of 14 percent, estimates that these matches uncovered half of all its fraud-related claims. According to the National Employment Law Project, an advocacy group, states typically recover about half of the money lost to improper payments.

James Sherk of the Heritage Foundation says states have a point that the headline numbers would lead people to believe that more fraud occurs than actually does, but says states still need to fix the problems. “The state should not be continuing to send checks to workers after they have returned to work, and it should be verifying the work-search requirements are met,” Sherk says. “Those and other requirements exist for a reason and need to be enforced.”

Outdated technology blamed

What many states say they need most is money to replace outdated computers, which they say account for many of the problems. Arizona and Colorado are part of four-state consortium that was recently awarded $72 million in federal funds to replace archaic systems. “This represents a desperately needed modernization,” says Kaighn of Arizona, who says the state is currently using 1980s mainframe technology.

Washington State estimates it will cost more than $100 million to replace its two main computers involved in processing unemployment claims. The state is spending $54 million to replace the main tax computer and has set side another $30 million for the benefits side. According to Sheryl Hutchison, a spokeswoman for the state’s Employment Security Department, it will probably take up to eight years for those projects to finish.

September 28, 2011

Unemployment Taxes Becoming "Significant Cost" says CNNMoney

Employers Hit by Unemployment Tax Hikes

By Tami Luhby

Read the article at CNNmoney

NEW YORK -- Companies have yet another reason not to boost hiring: rising unemployment taxes.

Employers around the nation are getting socked with higher state unemployment tax bills as states are forced to shell out more than $1 billion in interest payments this month. More than 30 states have had to borrow billions from a federal fund to cover unemployment benefits for their jobless residents in recent years.

And this is only the first of two tax spikes employers are contending with, on both the state and federal level. Come January, companies in 24 states could have to shell out between $21 and $63 more per employee in federal unemployment taxes.

These hikes are the latest in a series of unemployment tax increases as states look to replenish their unemployment trust funds devastated by the Great Recession.

Last year, employers paid 27.8% more in state jobless taxes, said Doug Holmes, president, UWC Strategic Services on Unemployment & Workers' Compensation, a business trade association.

"Unemployment taxes, which were a relatively low bottom-line cost in 2008, are now becoming a significant cost," Holmes said. "It discourages companies from electing to hire new employees."

9 hard-to-fill jobs

This is the first time during this economic downturn that states have had to pay interest on their federal borrowing, which currently totals nearly $38 billion. The 2009 stimulus act waived interest payments for two years, giving both cash-strapped states and their employers some breathing room.

Both groups lobbied Congress last year to extend the relief for another two years, but lawmakers declined.

So states were forced this year to make some tough decisions on how to handle the interest charges at a time when they were struggling to balance their own budgets. Some dipped into other state funds or borrowed money, but most shifted the burden to employers.

New York, for instance, sent its companies a bill in mid-July requesting a lump-sum payment of up to $21.25 per employee to cover its $95.4 million interest charge due September 30.

Companies were not pleased, said Mike Durant, New York state director for the National Federation of Independent Business. For small employers, even a couple of hundred dollars in unexpected expenses can hurt, he said.

For Margery Keskin, an executive at four construction-related companies in upstate New York, the extra $2,000 her companies had to shell out means less money goes to bonuses or profit sharing for her roughly 40 employees. And she will have to think twice before she hires anyone.

"We try not to hire because we will be socked by a bigger tax bill for unemployment insurance," said Keskin.

Other states, however, have tried to spare their employers.

California, for instance, borrowed its $303.3 million interest payment from a disability insurance fund. Texas issued bonds at a lower interest rate to wipe out its balance before the interest came due. And Ohio dipped into tobacco settlement funds to settle a roughly $70 million interest bill.

"We did not want to increase the tax burden on job creators," said Ben Johnson, spokesman for Ohio's Department of Job and Family Services.

Even in states trying to shield companies, employers could see their taxes rise next year. That's because federal unemployment taxes are scheduled to go up for firms located in states that have been borrowing in recent years.

In most of these states, the 2012 federal levy will rise by $21 per worker. But that amount increases the longer the state has been borrowing. Michigan companies, for example, will have to pay $63 per employee next year.

While states have been slowly paying down their balances by hiking taxes and curtailing benefits, many are likely to have loans outstanding for years to come, experts said. That will help prompt companies' federal unemployment tax levy to soar by 89% by 2016, according to U.S. Labor Department estimates.

During the recessions of the 1970s and 1980s, it took states eight years to pay off their loans, said Rich Hobbie, executive director of the National Association of State Workforce Agencies. This go-around will be worse.

"We're going to struggle longer than that," he said.

September 20, 2011

Billions in Unemployment Benefits Paid in Error

From the Wall Street Journal

by Sara Murray

View the Article at WSJ

Nearly $19 billion in state unemployment benefits were paid in error during the three years that ended in June, new Labor Department data show.

The amount represents more than 10% of the $180 billion in jobless benefits paid nationwide during the period. (See a map of improper payments by state.) The tally covers state programs, which offer benefits for up to 26 weeks, from July 2008 to June 2011. Layers of federal programs that help provide benefits for up to 99 weeks weren't included.

Sortable Chart of Each State's Overpayments

The figures were released Wednesday as the Obama administration promotes its bid to reduce waste at federal agencies. The federal government foots the bill for administering the programs, and states are supposed to pay for the benefits. Many states exhausted their unemployment insurance trust funds during the long recession and slow recovery, prompting them to borrow from the federal government to replenish their funds.

Improper payments most often occur when recipients claim benefits even though they have returned to work; employers or their administrators don't submit timely or accurate information about worker separations; or recipients don't correctly register with a state's employment-service organization.

The Labor Department launched a plan to crack down on the improper payments, targeting Virginia, Indiana, Colorado, Washington, Louisiana and Arizona in particular for their high error rates. Those states will undergo additional monitoring and technical assistance until their error rates dip below 10% and remain there for at least six months, according to the Labor Department.

"The Unemployment Insurance system is a unique partnership between the federal government and the states. States bear the responsibility of operating an efficient and effective benefits program, but as partners the federal government must be able to hold them accountable for doing so," Labor Secretary Hilda Solis said in a release.

Indiana had the highest error rate, with improper payments accounting for more than 43% of the total amount paid. But Mark Everson, commissioner of the Indiana Department of Workforce Development, said the differences in error rates stem from variations in state programs.

"To characterize it as waste, fraud and abuse is just manipulative," Mr. Everson said. "There's no way in the world you could cut the 43% of people off."

Mr. Everson pointed out that in Indiana, benefit recipients are required to list three work searches. If a recipient fills out only two of the three searches correctly, there are cases when the recipient can still receive benefits. But that counts as an error.

The Labor Department noted, "it may be misleading to compare one state's payment accuracy rates with another state's rates… States with stringent or complex provisions tend to have higher improper payment rates than those with simpler, more straightforward provisions."

September 15, 2011

Nonprofit Employment Fares Better in Downturn

Nonprofits have proven more resilient in the recent economic downturn than many expected. According to a new report from the Johns Hopkins Nonprofit Economic Data Project, they fared even better than their for-profit counterparts.

"While other sectors are shedding jobs, nonprofit organizations boosted their employment by nearly 1 percent between 2009 and 2010," reports the project, which analyzed U.S. Bureau of Labor Statistics data from 45 states. In 2008 and 2009, nonprofit employment had an even greater upswing, causing total growth in nonprofit jobs from 2007-2010 to reach 5%. Compared to for-profits, who experienced a total job decline of 8% over the same years, this growth is quite noteworthy.

This is not to say that nonprofit job growth has not faltered over the years under economic pressure. U.S. nonprofits jobs growth fell from a rate of 2.6% in 2008 to a 0.8% growth in 2010. But overall, nonprofits have shown better employment trends throughout the decade compared to for-profits.

The UST Division of Nonprofit Research has seen similar employment trends among the Unemployment Services Trusts' 2,100 nonprofit members. Says Donna Groh, Executive Director of UST, "Although the recent Great Recession hit nonprofits the hardest we've seen in UST's 28 year history, we've always seen that they weather the economic storms better than the for-profit sector."

In fact, in 2010 surging unemployment caused many states to increase unemployment taxes on employers, a trend that is expected to continue as states try to recover from unemployment fund deficits. As a result, there were a large number of nonprofits who realized that it didn't make sense for them to continue paying a tax rate that subsidized the unemployment costs of all employers across their state. While for-profits are locked into paying state unemployment taxes, nonprofits are allowed by federal law to opt out of the state UI tax system and only pay for their own workers' unemployment claims.

"Since many nonprofits realized their claims were much lower than other employers', there was an opportunity for them to save, and open up more of their unrestricted funding" says Groh. The result? UST had some of the largest growth in membership they'd had in years. Many of UST's new members in 2010 were looking for help opting out of the state UI system, while others realized they needed help monitoring the unemployment claims and more HR support as direct reimbursing employers.

With more nonprofits realizing that their employment history doesn't warrant the type of unemployment tax increases they are seeing from the state, UST expects that even more nonprofits will exercise their right to opt out of the UI system and become reimbursing employers in 2011. With many states tacking on special assessment fees in order to help pay for all of the unemployment fund borrowing over the past few years, there's little question that employers across the nation will see their unemployment costs go up. And as Groh says, "Nonprofits are getting smarter and savvier from the financial crisis... This is one cost they're learning they can save on."

September 07, 2011

How Big is Your State's Unemployment Debt?

Infographic: A due date nears on unemployment trust fund loans

by Carla Uriona and Mary Mahling at

View the story at

"Later this month, states will have to make the first interest payment on the money they borrowed from the federal government to keep sending unemployment checks to workers who’ve lost their jobs. Some 28 states have outstanding loans with the federal government. According to a May estimate by Federal Funds Information for States, the total interest due by September 30 is $1.3 billion. The federal stimulus package had provided interest-free loans to states, but that grace period has expired. Earlier this year, President Obama asked Congress to waive those interest payments for another two years, but the idea went nowhere. The proposal could resurface when Congress returns this month and takes up the president’s jobs package."

September 07, 2011

In Washington State, Nonprofits Can Reduce Operating Expenses with Help of New Partnership

Summary: A partnership with the newly-formed association Washington Nonprofits will increase potential savings for many nonprofits in the state of Washington, reports the Unemployment Services Trust.

Santa Barbara, CA, September 8, 2011 -- The Unemployment Services Trust (UST) and Washington Nonprofits are pleased to announce their new partnership agreement that will help nonprofits in Washington state save money on their unemployment expenses, helping reduce operating costs for members long-term.

Unemployment tax rates are expected to continue rising over the next decade because even though unemployment is decreasing, demands on state funds are driving taxes up. Washington legislation allowed the state to lower unemployment taxes for about 80,000 small businesses (those in rate classes 1-34) after large tax hikes last year. While tax breaks have provided relief to many nonprofit employers, there are still many recovering from the recession and looking for new funding and ways to free up more of their funds to support their mission.

Since 1991 Northwest Nonprofit Resources has partnered with UST to help nonprofits save money and receive support on unemployment claims. Now Washington Nonprofits, which formed just last year, will also work with UST to help nonprofits save money on unemployment expenses. “UST exists to save money for nonprofits so they can use those funds to advance their missions. Now, more than ever, nonprofit organizations need to maximize their resources. UST will work with members of Northwest Nonprofit Resources and Washington Nonprofits to do just that,” states Sandra Gill, director of NNR.

Donna Groh, Executive Director of UST stated: “Building on our history of working with NNR to assist nonprofits save money to put towards their mission, we are very pleased to enter into this new partnership with Washington Nonprofits to bring the benefits and cost savings of the Trust to even more organizations throughout Washington.”

UST, a national unemployment trust, helps 501(c)(3) organizations in Washington and across the country to opt out of the state unemployment tax system, as they are allowed by Federal law. Once out of the system, they are able to simply pay back the state, dollar-for-dollar, any time a former employee files for unemployment. UST provides them with asset protection and unemployment claims monitoring to safeguard their cash flow from volatile or unwarranted unemployment claims, and helps create a savings program so that they have the reserves to pay for claims when they need it. Because they own their accounts, nonprofits who join UST can consider their account an asset instead of a state tax liability.

The UST program is just one of the many resources available to members of Washington Nonprofits. To learn more about the organization and its benefits, visit For more information about UST, visit

August 11, 2011

Businesses Asked to Fund State Borrowing Costs – Nonprofits Find Safe Haven

Summary: Employers across the U.S. are being asked to make payments to help compensate for the states’ shortfall in unemployment funding, and resulting interest owed to the Feds, reports the Unemployment Services Trust.

Many businesses received letters recently stating they would have to pay supplemental fees to help pay down debt their state governments have racked up in the course of paying out unemployment benefits. Many state unemployment funds are insolvent due to the prolonged recovery of the recent recession, and some state debts continue to grow, reports the Unemployment Services Trust.

In Colorado, where the state borrowed $346 million last year, about 35,000 employers will be required to make special assessment payments. On average, businesses will pay $340 each, totaling $11.9 million to help the state pay the interest owed. Connecticut has borrowed more than $810 million from the federal UI fund, a number that is expected to increase to $1 billion before it begins to shrink. Employers will be required to pay up to $25.50 per employee, which may not sound like much but can really add up quickly. New York has borrowed more than $3 billion to continue paying unemployment benefits and is also requiring businesses to pitch in to pay down the $95 million due to the Fed on September 30. Employers in New York will pay up to $21.25 per employee, a number formulated based on taxable wages for the latest fiscal year. Most states will assess interest payments quarterly until loans are paid off, which, depending on the individual state’s surmounted debt, could take several years.

The news of these special assessments has made employers grow even more wary. Terry Jannsen, President of Jannsen + Company, an accounting firm in Pewaukee, Wisconsin stated in a release, “This may not sound like a big expense to employers, but the negative impact could be substantial for companies already feeling the pinch. If you are a small business, you may not have budgeted for this expense, and don’t have the reserves to make the interest payments. If you are a larger company, the assessment may cost one or more jobs in an already lean economy.”

Employers are hoping that lawmakers pass legislation that would waive the interest fees as they did in 2009 and 2010, however, to date there has been no indication this will happen in 2011. In a time when new job creation is imperative to our economy’s overall health, these special assessments are not only stifling company growth, but sustainability to boot. A few organizations, however have found some relief.

Direct reimbursing employers across the United States are exempt from most special assessments since they fund their unemployment claims on their own, repaying the state each time a claim is filed against the company instead of paying into the state’s unemployment tax system. According to federal law, 501(c)(3) organizations have this distinct opportunity. There are a couple ways to do this:

    Nonprofit employers may take it upon themselves to manage, dispute and mediate unemployment claims

    Or, they may join an unemployment trust who handles all aspects of the process

Many organizations opt for the unemployment trust in order to lessen the stress on their Human Resources department as the mitigation process can be burdensome. One such trust is the Unemployment Services Trust (UST). With UST, organizations make quarterly deposits into a reserve account that belongs to the organization itself. Each time an unemployment claim is filed against the organization, the Trust reimburses the state for the exact amount that is billed, instead of paying into the state tax system where typically only $1 is paid out in benefits for every $2 that is paid in taxes.

Currently, more than 2,000 nonprofit organizations work with UST to lower unemployment costs and opt out of the state unemployment tax system. For more information about the organization, visit or call (888) 249-4668.

July 05, 2011

Unemployment Services Trust Partners With Maryland Nonprofits to Reduce Operating Expenses for 501(c)(3) Organizations

Summary: Partnership creates potential savings for many nonprofits in the state of Maryland, reports the Unemployment Services Trust.

The Unemployment Services Trust (UST) and Maryland Nonprofits are proud to announce that they are joining forces to work with nonprofit organizations in Maryland to help save money on unemployment expenses.

Maryland Nonprofits is the primary source for guidance and assistance on nonprofit management issues for Maryland’s near 1,600-member nonprofit community. Maryland has 255,408 nonprofit employees within all service areas, including: Arts, Culture & Humanities, Education, Environment & Animals, Health, Human Services, and Public & Societal Benefit. Each year, more than 300,000 nonprofit professionals utilize Maryland Nonprofits’ resources, and now Maryland Nonprofits will be better able to assist its members with the help of UST’s cost-saving program.

Donna Groh, Executive Director of UST stated: “We are so pleased to enter into this partnership with Maryland Nonprofits. UST exists to save money for nonprofits so they can use those funds to advance their missions. Now, more than ever, nonprofit organizations need to maximize their resources and UST will work with Maryland Nonprofits’ members to do just that.”

UST, a national unemployment trust, helps organizations opt-out of their state's unemployment tax system. Permitted by federal regulation, opting-out allows nonprofits to handle their own unemployment claims, and save money. UST members own their own account, which is a pre-paid asset used to cover unemployment expenses that occur when an unemployment claim is filed by a former employee. The nonprofit becomes a "direct reimbursing employer," meaning they only pay for unemployment collected by former employees, and are sheltered from rising tax rates. UST offers asset-protection and unemployment claims monitoring that many nonprofits need to safeguard their cash flow from volatile or unwarranted unemployment claims. In addition, UST members benefit from conservative asset investment, stop-loss protection, bonding, and professional human resources support.

UST, founded by nonprofits for nonprofits, is the largest of all national unemployment trusts. Consisting of more than 2,100 member organizations from 47 states (and DC), UST has been helping nonprofits reduce expenses since 1983. UST's long-standing relationship with nonprofit organizations has provided more than $33 million in refunds to trust members; and an additional $35 million in annual unemployment claim savings, presenting organizations with valuable resources to put toward achieving their missions.

For more information about UST, visit or call (888) 249-4788. You can also visit Maryland Nonprofits on the web at