-



U.S. DEPARTMENT OF LABOR
Employment and Training Administration
Washington, D. C. 20210

CLASSIFICATION

UI

CORRESPONDENCE SYMBOL

TEUPDI

ISSUE DATE

May 12, 1997

RESCISSIONS

None

EXPIRATION DATE

May 31, 1998

DIRECTIVE

:

UNEMPLOYMENT INSURANCE PROGRAM LETTER NO. 32-97

 

TO

:

ALL STATE EMPLOYMENT SECURITY AGENCIES

 

FROM

:

GRACE A. KILBANE
Director
Unemployment Insurance Service

 

SUBJECT

:

Analysis of the Impact of Employee Leasing on Unemployment Insurance Programs

  1. Purpose. To announce the distribution of the final report of a study conducted to determine the impact of the employee leasing industry on State unemployment insurance (UI) programs. The study was conducted by KRA Corporation under contract to the United States Department of Labor (USDOL).

  2. Background. Due to interest by national, regional, and State UI managers and policy makers about the growth in the employee leasing industry and its impact on, and implications for, the State UI programs, the USDOL entered into a contract with KRA Corporation to study the effect of the employee leasing industry on State UI programs. The particular interests of State UI managers, with respect to the employee leasing industry, were exhibited through a survey conducted by a committee formed by the Interstate Conference of Employment Security Agencies (ICESA). Primary among the areas of interest were: (a) the aggregation of employees into the employee leasing industry rather than the industry in which the workers normally performed services; (b) reduced experience rating; (c) tax rate manipulation; and (d) bankruptcies of employee leasing companies.

  3. Study Purpose: The purpose of this study was to develop a national perspective on the impact of employee leasing on the UI system. To meet the study objective, KRA Corporation conducted a survey of States between September 1 and November 1, 1994; aggregated the State employee leasing statutes and regulations; delineated the State definitions of employee leasing and of temporary help; and performed an analysis of wage data provided by four State UI agencies.

    Of the fifty-three (53) State Employment Security Agencies (SESAs), only fourteen (14) do not have a definition of employee leasing in their laws, regulations or agency policies. Although the majority of SESAs have developed a definition for the industry, few track the activities of employee leasing firms or have techniques with which to differentiate employee leasing companies from other firms. Many SESAs currently track the activities of various industries and analyze the impact of the industries on the State UI program. Development of similar methods of analyses by the SESAs for the leasing industry could provide useful information for decision makers in the future.

  4. Required Action. SESA Administrators are requested to distribute the referenced report to appropriate SESA staff. SESA Administrators are also encouraged to take steps to track and analyze the impact of the employee leasing industry on the State's UI program.

  5. Inquires. Direct inquiries to the appropriate Regional Office.

  6. Separate Cover. The final study entitled, Employee Leasing: Implications for State Unemployment Insurance Programs, was mailed under separate cover.