Many are wondering why the company layoffs are being done incrementally and not all at once or in large batch mode. The answer lies in the incentives the bank receives to operate this way. Let me explain.
What Is SUI?
State Unemployment Insurance (SUI) is a tax employers pay to fund unemployment benefits for workers who lose their jobs through no fault of their own. Every employer pays it — but not at the same rate.
Why the Rate Changes
States use an experience rating system.
This means your employer’s tax rate goes up or down based on how many former employees file unemployment claims.
- More layoffs → more unemployment claims → higher SUI tax rate.
- Fewer layoffs → fewer claims → lower SUI tax rate.
The rate can vary dramatically. In some states, employers with few layoffs pay almost nothing, while employers with heavy layoffs pay 10x or more.
How Layoffs Trigger Higher Costs
When a company lays off employees:
- Those employees file for unemployment.
- The state attributes those claims to the employer.
- The employer’s SUI tax rate increases for the next year (or several years).
- The company pays more per employee going forward.
For large employers, this can mean millions of dollars in additional annual taxes.
Why Companies Try to Avoid “Layoffs”
Because layoffs increase their tax rate, companies have a financial incentive to avoid anything that triggers an unemployment claim. This is why employees often see:
- Sudden performance downgrades
- “Voluntary resignation” pressure
- PIPs used as exit ramps
- RTO mandates that force attrition
- Location changes employees can’t meet
- “Resign or be terminated” conversations
- Severance tied to waiving unemployment claims
These tactics shift the separation from employer‑initiated to employee‑initiated, which avoids unemployment claims and keeps the SUI tax rate low.
Why This Matters
Understanding this system helps employees recognize:
- Why companies push resignations over layoffs
- Why performance ratings suddenly change
- Why severance may be tied to waiving unemployment
- Why “restructuring” is framed as “performance management”
- Why attrition‑by‑policy is cheaper than layoffs
This isn’t about conspiracy — it’s about incentives.
And incentives shape behavior that drives our illustrious culture.