Jobless insurance rates to rise

By Kelly Yamanouchi
Advertiser Staff Writer

The state sent notices this month to employers alerting them that their unemployment insurance rates have increased from an average of 1.2 percent to 1.6 percent of payroll.

Many businesses were not amused.

The Department of Labor and Industrial Relations said the increased premium was needed to replenish the unemployment insurance fund that paid out $140 million in benefits last year. Businesses that have not cut jobs and not used the unemployment insurance fund in the past year say they are being punished with higher insurance rates when it is primarily the tourism industry that has laid off workers and are depleting the fund.

"We're not an industry that has a lot of (unemployment) claims," said Jacqueline Watanabe, director of human resources for auto dealership group David DeLuz Sr. Enterprises Inc. in Hilo, Hawai'i. "Only certain industries have been affected such as tourism, but the (rate) increases are across the board."

Watanabe said she plans to appeal the rate increase, which will cost her 160-employee company more than $100,000 in additional expense for the year. An added cost of that amount would make her think twice about hiring more employees this year, she said.

Joseph Nicolai, president of JN Automotive Group, said his company paid nearly $73,000 in unemployment insurance and had only $18,400 in claims last year, and nearly $355,000 in unemployment insurance fund reserves at the end of the year. JN Automotive's rate will increase about 45 percent this year, and Nicolai is also contesting the higher rate, saying the increase was arbitrary and without justification.

"Not only am I contesting the increase in the contribution rate. I'm contesting that they're holding $354,000 of my money. I want that back," Nicolai said.

Tourism-related businesses aren't pleased either. The higher costs come at a time when many in the visitor industry are struggling to attract business to make ends meet.

In addition, past unemployment claims resulting from layoffs can contribute to higher unemployment insurance costs for those companies. About 6,000 jobs were lost after Sept. 11, 2001, mostly in tourism.

Outrigger Enterprises Inc., for example, is facing a more than one-third increase in unemployment insurance costs. "It's a big jump," said Bill Brown, Outrigger's vice president of human resources and planning. "The most difficult part of it is it's hitting us just when we're seeing a downturn in business."

Hawai'i's unemployment insurance fund, which held about $303 million at the end of February, is paid from employer contributions and the interest they earn. The rates increased Jan. 1 for the first time since January 2001. Rates are determined by a legislative formula for the required amount of reserves in the unemployment trust fund.

The trust fund would have had to had $331 million last November to avoid the increase this year, but it had only $309 million at that time.

While legislators consider a bill to extend unemployment benefits, some employers are concerned that may lead to a higher tax next year as well.

"That will drain the fund even more," said Connie Hastert, director of government affairs for the Hawai'i Employers Council. She said the council's unemployment insurance rate increased six-fold this year, from .1 percent to .6 percent of payroll.

"We don't think there's a need for this at this time," Hastert said, pointing to the lower unemployment rate in Hawai'i compared with the national rate. "We just don't think it's going to help Hawai'i employers at a time when they need help."

Reach Kelly Yamanouchi at 535-2470, or at kyamanouchi@honoluluadvertiser.com.