Quick look: Unemployment fraud is becoming increasingly problematic, driven by a spike in improper unemployment payments made during the pandemic. Even when businesses are not directly involved, they are often still left to deal with the consequences. Having a PEO partner who oversees risk management, such as maintaining employee record accuracy, can help alleviate the added pressure of dealing with fraudulent activity and the costs which come with it.
A New York audit released by the state’s comptroller office revealed scammers have stolen approximately $11 billion in fraudulent unemployment payments, leaving business owners in New York footing part of the bill. At least 17% of unemployment benefits paid between 2020 and 2021 were flagged as fraud.
To help pay for the state’s costly mistake, business owners have been faced with surcharges for interest payments. Due to the additional strains of limited budgets, this takes a toll on small- and medium-sized businesses (SMBs) the most. And, unfortunately, New York isn’t the only state facing this problem.
Several other states are in the red according to the U.S. Department of Labor (DOL), including Pennsylvania, Massachusetts, and Connecticut, which also show an improper payment rate greater than 13%. A surge of unemployment benefit applications during the height of the pandemic combined with a lack of oversight and outdated computer systems were determined to be the crux of the problem.
As the pandemic demand hit an already vulnerable system, it led to a spike in fraud. In particular, the Pandemic Unemployment Assistance program lacked certain personal verification which could’ve prevented this ramp up of scammers. However, these issues have been ongoing for the past few decades but have been largely unaddressed.
History of unemployment fraud
The DOL’s inspector general identified a problem with unemployment fraud schemes dating back to the late ‘90s. Part of the issue stemmed from imposter accounts obtaining fraudulent payments in multiple states. The department went on to detail the systemic weakness making states vulnerable and proposed reforms to address some of the insufficiencies. Though, due to a lack of funding, budgets for the DOL, as well as separate, private business investigations, were halted.
Fast forward to 2022 and now the DOL is trying to subsidize the current ramifications by announcing $225 million in additional funding for states to pay for administrative costs relating to fraud prevention and fund recovery. According to the notice, permissible uses for the funds include:
- Payment of incurred expenses for reporting on investigation and overpayment activities
- Payment of incurred expenses to gather business requirements, program computer systems, or otherwise implement tools, strategies, or solutions to detect, establish, and recover overpayments
- Hiring staff or obtaining contract services for processing and recovering overpayments
Protecting your business with risk management
Businesses can’t afford to be burdened by debts due to fraud. SMBs, in particular, are often managing a delicate balancing act to keep their businesses afloat and on their intended growth trajectory. It’s beneficial for SMB leaders to partner with HR experts who understand the ins and outs of risk management and compliance regulations.
ExtensisHR’s professional employer organization (PEO) solution helps to mitigate and tag fraudulent actions with oversight and quality control checks to validate unemployment claims. It safeguards SMBs through state unemployment insurance and management services by reviewing employee terminations and providing expert support in the event of a claim. Risk and compliance services also include:
- Employer Protection Program – Aid in creating progressive workplace practices to minimize risks, costs, and time with employment-related issues such as wrongful termination, discrimination, and harassment.
- Risk management and workplace safety – Facilitation of a customized safety action plan and maintenance program to educate and protect best practices to uphold ever-changing legal and regulatory requirements.
- Workers’ compensation insurance – Pay-as-you-go workers’ compensation insurance options, which help SMBs to manage safety and costs.
Ensuring trust through ExtensisHR
Finding a solution to protect SMBs during their various growth phases requires a trusted team who can adapt quickly and effectively to the changing environment. Though unemployment fraud is nothing new, having the training, experience, and technology to ensure the accuracy of claims is critical to any business. In addition to risk management and compliance services, a PEO solution through ExtensisHR also includes a comprehensive suite of HR services including benefits administration and planning, employee and supplemental benefits, and ACA compliance.
SMB employers can also rest assured knowing ExtensisHR has a robust, modern HR technology in place. The platform makes it more secure and easier for business leaders to manage their HR tasks. Additionally, a solid foundation is secured through:
ExtensisHR takes workplace safety and security seriously and is among the 1% of industry leaders with Employer Services Assurance Corporation (ESAC) accreditation, Certification Institute of Workers Compensation and Risk Management, and recognized as an IRS Certified Professional Employee Organization (CPEO), which aligns with the highest regulatory standard set by the U.S. government.
Furthermore, with a net promoter score (NPS) of 82% (compared to the industry average of 37%), ExtensisHR upholds a dedication to reliability, accountability, and trustworthiness for SMB clients. An in-house service team delivers a 97% same-day response rate, giving business leaders confidence in receiving efficient, expert-driven resolutions.
To keep current with modern workforces, proprietary software enables business leaders to manage HR tasks per their schedules. The Work Anywhere® platform synchronizes performance goals, improves cost management, and reduces compliance risk as part of its many benefits.
There is no shortage of responsibilities when it comes to HR. Mitigating risk and maintaining compliance are only part of a bigger need when keeping companies secure. A PEO solution alleviates this burden and gives SMB leaders peace of mind as they focus on expanding their business.
ExtensisHR is a people-first organization focused on collaboration to achieve exceptional results for our clients. Learn more about the benefits of partnering with our team of HR professionals to support your overall goals and provide peace of mind. Contact ExtensisHR today.