Senate President Thomas Alexander, left, and Senate Majority Leader Shane Massey, right, pictured in the Senate on May 6, 2025. (Photo by Jessica Holdman/SC Daily Gazette)
COLUMBIA — A paperwork slipup on payments that South Carolina companies make into a safety net fund for laid off workers can cost small business owners thousands of dollars annually, business organizations warn.
Missing a payment notice can spell a nearly 9,000% rate increase.
Ending such a spike is part of legislation that seeks to help business owners paying into the fund. It would not boost aid to workers who lose their jobs.
There hasn’t been a major overhaul of the unemployment code since 2010, after years of underfunding and record levels of Great Recession-era job losses sent the state’s fund for jobless benefits spiraling into insolvency. With the fund’s balance reaching record highs, legislators are considering another revamp.
“The decisions that we made, while they were painful at the time, they’ve worked and we’ve done the right thing,” said Senate Majority Leader Shane Massey, R-Edgefield. “But now we’re at a period, 15 years later, where it looks like we’re probably collecting more than we need to collect.”
A state Senate proposal sponsored by Massey and backed by the state’s largest business organization seeks to spread the cost of unemployment benefits more evenly among businesses that pay into the fund. It also reduces penalties for business owners who accidentally underpay into the system and dials back the amount of money the state is required to keep in reserves to dole out benefits.
Despite discussions last year on tying benefits to inflation, the bill makes no adjustments to payments for working South Carolinians who lose their jobs and rely on the benefits to bridge the gap until they find a new position. In South Carolina, they have 20 weeks to do so.
A Senate panel, headed by Massey, voted unanimously to advance his proposal, which is on the agenda of Thursday’s meeting of the full Senate labor committee.
Meanwhile, a separate bill passed by the House seeks to kick people off benefits sooner in times of economic prosperity.
That’s in a state where the maximum benefit is just $350 a week. The cap was $326 weekly until last year. The $24 difference marked the first increase in about two decades.
South Carolina funds unemployment benefits through fees paid by companies. The rate each business pays varies based on how often they lay people off and how much they rely on the system as a safety net for workers’ lost wages.
Nearly 104,600 employers — about 84% of all businesses within the system — pay a nominal administrative fee of just $8.40 per employee annually, according to data provided by the state Department of Employment and Workforce.
That’s the lowest of a 20-tiered rate structure created by the 2010 law. Under current rates, the other 19 taxing tiers range from $15 per employee to $764 per person yearly for businesses that habitually lay people off. Less than 5% of businesses pay that top rate, according to agency data.
The Senate bill gradually moves more than 30,000 businesses into tiers that pay more. That’s because companies’ rates would be based on their layoff history over five years instead of the last three.
The expectation is that the agency would gradually decrease tax rates as more businesses pay into the system.
Under the bill, companies in the lowest rate class would remain grandfathered in until the next time they lay someone off.
Meanwhile, the House unanimously passed a proposal that would reduce the maximum number of weeks a laid off worker can receive benefits when the jobless rate is low.
As South Carolina continues to enjoy a bustling economy, the measure would take the count from 20 weeks down to 12, with the aim of prompting people to take a new job sooner. Only when the average unemployment rate for a given period rises above 5.5% would residents be eligible for additional weekly benefits.
The average rate must rise to levels not seen since the Great Recession — when the unemployment rate stayed above 9% for more than 3 ½ years — before the state will grant the full 20-week maximum.
The House passed an identical bill in 2024, but the Senate never took it up.
Laid off SC workers may have to find a new job sooner under changes to unemployment benefits
Even without the bill, unemployed South Carolinians on average receive benefits for just shy of 12 weeks, while more than a third receive the full 20 weeks of payments, according to the most recent U.S. Department of Labor data.
In December, 4.8% of South Carolinians were unemployed and looking for a job, compared to 4.4% nationally, according to the latest data available.
That month also marked the first time since the COVID-19 pandemic when there were more jobless workers seeking employment than jobs available, according to federal data.
“It’s one thing to find a job, because everybody can go out and work at Chick-fil-A or at a gas station,” said House Minority Leader Todd Rutherford, D-Columbia. “It’s another thing to find a job in your field.”
Registered nurses — a position that requires specialized training and licensing — and retail workers and managers made up the two largest categories of job openings posted in the state during the past year, according to data from the state employment agency. Health care management, mechanics and maintenance workers, and restaurant managers rounded out the top five categories.
Finding work gets even harder in more rural parts of the state.
Senators also want to take the edge off punitive rate hikes charged to companies that inadvertently miss a payment, made on a quarterly basis.
If a business owner underpays or fails to pay altogether, the state Department of Employment and Workforce sends out a notice giving that owner 10 days to send in what’s owed, plus a late fee.
The department does have the discretion to grant extensions. But business owners who do nothing are automatically bumped to the highest rate class when their next due date comes around.
According to data from the department, this happens fairly regularly.
That means a mom-and-pop business with a dozen employees can go from owing about $100 annually to upwards of $9,000 — punishment that business organizations argue doesn’t fit the crime.
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Before the 2010 overhaul, the agency that doled out jobless benefits was managed by a three-member board and an executive director. But the Legislature had to approve any change in rates.
Management problems, combined with the Legislature’s yearslong unwillingness to vote to increase taxes on businesses, resulted in the elimination of reserves amid chronically high unemployment levels. The state had to borrow from the federal government to keep benefits flowing.
A nearly $1 billion debt accumulated between December 2008 and April 2011. The state’s unemployment rate stayed at an 11.7% high for several months in late 2009 before gradually dropping.
As the debt grew, the Legislature restructured the agency from a stand-alone department to a Cabinet agency overseen by a director reporting to the governor. The law created a repayment plan for the debt and put the agency in charge of setting rates within the new tiered system, taking that unpopular duty off legislators’ hands.
Both the agency and legislators then clamped down on who can receive benefits, and for how long.
That included a 2011 law cutting, from 26 to 20, the maximum number of weeks the jobless can receive in state-governed benefits. In 2012, legislators required full, automatic denial of benefits for workers fired for misconduct, such as theft. And internal policy changes set a four-week maximum of state-governed benefits to people who are fired for offenses that don’t meet the misconduct definition, such as tardiness and attendance issues.
Since then, South Carolina has stockpiled $1.8 billion in the benefits reserve account, even as the agency has repeatedly cut rates since paying back the federal debt in 2015 ahead of schedule.
The state doesn’t really need that much on hand, business organizations argue.
Letting the fund fall to $1.5 billion would still be enough to meet needs, even in the worst of times, the groups say.
An agency report backs up those arguments.
Amid the COVID-19 pandemic, total monthly jobless payouts reached a peak of $240 million in the state. That did not include federally paid boosts to weekly benefits.
But unlike the Great Recession, the spike in unemployment — to 11.7% in April 2020 — did not last long, as South Carolina was one of the last states to issue stay-at-home orders and force closures of businesses deemed nonessential. It was also one of the first to lift restrictions.
In 2020, legislators approved putting more than $800 million of federal pandemic aid toward replenishing the state’s unemployment trust fund. Their reasoning was that businesses shouldn’t be hit with higher taxes to rebuild reserves for layoffs out of their control — especially at a time when they’re struggling to recover.
In its 2025 annual report, the employment agency recommends “considering a change” to the balance required by law. Using data on the workforce and growth estimates, $1.45 billion should cover all payments for the entire year of 2027, even if every eligible unemployed worker received the maximum $350 weekly benefit for the 20-week maximum period, according to the agency’s calculations.
South Carolina’s benefits have long been low when compared to those in other regions of the country. But in the Southeast, the state pays among the highest, House Republicans are quick to point out.
Still, many unemployed workers receive much less than the maximum amount. Federal data puts the state’s average weekly benefit payment at less than $315.
That’s well below cost of living estimates for the state.
A single parent with two children spends about $488 a week in the Palmetto State for just housing and groceries, according to an analysis of federal data by Massachusetts Institute of Technology. That doesn’t include the price of a cellphone for taking calls from potential employers or transportation to get to job interviews.
Some in the Senate, including Massey, expressed an interest last year in making sure benefits more closely match basic living expenses.
“It’s not designed to make you comfortable. It’s not designed to make you rich. But you should be able to buy food, he said. “We need to consider, with the inflationary environment that we’ve been in, whether what we do now adequately serves that purpose.”
Still, neither Massey nor any other GOP leader has raised that issue this year.
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Courtesy of South Carolina Daily Gazette
