A fellow business owner told me I should substantially reduce the hours of employees I want to terminate so they’re forced to quit and can’t collect unemployment. Have you heard of this practice before?
We have, yes, and we don’t recommend it. First, the practice doesn’t prevent the employee from filing for unemployment, and they may be able to collect unemployment even if they remain employed with you while working reduced hours. Second, when you reduce someone’s hours in the hopes that they quit, you risk creating a perception among employees that a cut in hours is meant to be punitive. And if the employee with reduced hours becomes disgruntled, they may be a threat to morale or choose to file a complaint with an outside agency. Third, the effect of a single unemployment claim on your insurance rate is pretty much negligible—and certainly nothing compared the costs of continuing to employ someone who should be terminated.
In general, if you need to terminate an employee and you have documented the reasons for doing so, it’s best just to terminate them. The possibility of a higher unemployment insurance rate shouldn’t be a factor in your decision.