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Effects of Seasonal Unemployment

written by: •edited by: Linda Richter•updated: 6/2/2011

If you employ people based on the time of year when you need more bodies, you’ll probably experience the effects of seasonal unemployment. Each state has different rules for unemployment benefits for seasonal workers. Here, you’ll find out how this works in your state along with tips for hiring.

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    Defining the Seasonal Worker

    Seasonal Workers Most seasonal workers fall into job classifications such as tourism, holiday or specific season work, construction, and farming. For example, an area that relies heavily on skiing during the winter months may have to hire more employees during those months to maintain facilities and assist visitors. This can include everything from additional ski instructors to food service and hotel or lodge employees.

    When winter subsides and the snow is gone, so too are the tourists meaning you won’t require as many employees and will have to lay some of them off. These laid-off workers, depending upon the amount of time worked, may or may not be eligible for unemployment benefits based on state rules.

    Image Credit (Free Digital Photos)

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    Seasonal Employers and Unemployment Benefits

    Taxes and Seasonal Workers The US Department of Labor provides a handy table that shows how long seasonal employees must work in order to receive unemployment benefits. Some states have laws that favor the seasonal employer such as New Mexico where in order to be eligible for seasonal unemployment benefits, the wage earner must work consecutively for at least 18 months and unemployment benefits are based on wages earned in the first 4 of the last 5 completed quarters.

    In most states, new employers are given a set unemployment tax rate they must pay to the state each quarter. This set rate usually remains the same until the new employer has some employment history (between 4-5 years) and that tax rate may go up or down depending upon the amount of unemployment benefits paid out.

    In addition to the state tax rates, every employer (seasonal or otherwise) must pay a FUTA tax which is 6.2% on the first $7,000 the employee earns; FUTA taxes are paid annually by filing a 940 IRS tax form. FUTA taxes help to fund state unemployment benefits.

    One of the effects of seasonal unemployment for an employer is if indeed they fall into state categories where unemployment benefits must be paid out, their state tax rate can rise year after year based on claims filed and paid. An initial small state tax rate can rise quicker than you think meaning each quarter, your state wage report (filed with your Department of Labor), takes gross wages and multiplies the given tax rate and that’s what must be paid to your state. The more claims filed and paid out, the higher your rate will rise meaning money out of your bottom line.

    If your state requires that a person must work a set number of quarters in order to be eligible for unemployment benefits, you may think if they work only 4 months a year you are safe from unemployment claims. Unfortunately, this is not always the case. Keep the word “consecutive" in mind here.

    A seasonal worker may work at a ski resort in the winter and once the “season" is ended may take up additional seasonal work in a warmer climate immediately, meaning their seasonal work is “consecutive." In the end, the seasonal employer who paid wages the longest is usually the one paying for that seasonal worker’s unemployment benefits.

    The best way to determine how the laws work in your state is to call your local Department of Labor. Even if a seasonal worker leaves your state and finds immediate work, state-to-state benefits come into play.

    Image Credit (Free Digital Photos)

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    Other Concerns & Hiring Tips

    Find Good Seasonal Employees There are more issues that you should be concerned about if you face seasonal unemployment. Some of these include:

    • Experience & Training – You may not be able to rely on the same seasonal workers each year and that usually means training due to lack of experience in the seasonal job—training takes time and money.
    • Contractual Laws – Some states also require the seasonal employer offer a written contract so the wage earner understands how long the employment will last and information on how to apply for unemployment benefits. If your state requires this and you don’t follow the rules, you may be in violation and that means monetary penalties.
    • Business Judgment – Many seasonal employers also hire on too many wage earners without deciphering trends and statistics on tourism, droughts in farming, holiday spending in the area, and construction down times. Don’t overstaff yourself to avoid this problem and allow your HR department to guide you.
    • Recession Proof – While there may be some recession-proof jobs, chances are if you are a seasonal employer, you don’t fall into this category so consider this before you hire.
    • Seasonal vs. Contract Labor – Many seasonal employers look at the option of hiring contract laborers instead of the seasonal employee. If you employ contract laborers, they are responsible for paying their own taxes and workman’s compensation premiums. You should weigh the best option for you based on the number of employees needed.
    • Consider Temp Agencies - Temporary employment agencies can provide you with the staffing you need, and workers remain employees of the employment agency, which can save you recruiting time, training costs, and tax and workman's compensation premiums.

    The effects of seasonal unemployment from an employer’s point of view are not one something that should be looked at lightly. Have a plan in place and study the employment trends in your area and find out if the seasonal workers you hire do jump from one season to another and remain consecutively employed. Seasonal workers who can maintain consecutive employment are your best bet as these workers will most likely stay on a steady path of work to provide for their lifestyles.

    Keep in mind that if a seasonal worker jumps from job to job and loses a job, if he worked for your company the longest, your unemployment account may be charged for paying out benefits.

    Finally, choose the right people for your seasonal needs. Offer bonuses if workers stay the entire season or agree to return the following year. These tips mean your seasonal customers will be able to see the same face and work with familiar staff, a benefit that in this world of better customer service is a must-have.

    Image Credit (Free Digital Photos)






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