The 2025 Outlook: How Outsourcing Unemployment Claims Management Can Offset Rising Costs
When economic conditions are challenging, cost containment becomes a high priority. And as we head into 2025, a variety of macroeconomic factors have businesses searching for ways to counteract rising expenses. In many cases, outsourcing a critical business function—like unemployment claims management—proves an effective strategy for combatting higher costs.
Rising Expenses Persist in Many Areas
Through our discussions with leading organizations, UC Alternative understands how cost pressures are affecting the business landscape. We believe the following areas will see continued challenges in 2025.
Labor Costs
Labor accounts for the largest share of costs for many organizations, especially in industries like healthcare. The tight labor market spurred by the pandemic drove up wages significantly in a short period, leaving little time to absorb the impact. While the rate of change is starting to level off from a high of 7% in early 2022, experts still forecast an average increase of 3.7% in 2025. That’s because the same factors that initially drove up labor costs—a scarcity of skilled workers and an increase in talent demand—still plague most industries.
Though the data suggest the labor market is softening slightly after job creation slowed in October 2024, and voluntary resignations seem to be on the decline, there’s still a long way to go before talent supply and demand normalize and wage pressures abate.
Healthcare Premiums
Rising healthcare costs remain a reality for employers, with about half planning to make health plan changes next year in response. Many factors are driving up medical costs, including stubborn inflation, increasing costs for prescription drugs (including the new GLP-1 weight loss drugs and novel cancer therapies), greater use of expensive behavioral healthcare services, and a higher incidence of catastrophic medical claims.
Not surprisingly, insurers are passing along these costs to employers in the form of higher rates. Survey respondents expect their 2025 premiums will rise an average of 5.8%, even after implementing cost-cutting measures. Without such steps, they believe premiums could increase as much as 7% in the coming year.
Technology Expenses
Businesses of all types continue to invest in technology for many reasons: to improve efficiency through automation, add innovative services, or comply with regulatory requirements, for example. They’re also boosting their cybersecurity measures to combat increasingly sophisticated threats, which might compound as bad actors begin to leverage AI for their gain.
Against that backdrop, global IT spending is set to increase more than 9.3% next year, with software spending alone expected to rise 14% over 2024. AI-related spending also is forecast to take off as more businesses find ways to harness the potential of this technology.
Supply Chain and Transportation Costs
No matter your industry, higher transportation costs can increase your expenses and weigh on profitability. For some businesses, they represent 50% to 70% of total logistics costs. Even for organizations with a less-direct tie, rising transportation costs translate to higher material costs as suppliers pass along a portion of their operating expense increases.
In a recent survey of senior executives across various industries, 41% said they’re worried about increasing transportation costs, while supply chain disruptions remain a top concern for 52%. These costs aren’t forecast to drop any time soon, since they’re driven by persisting problems like high labor costs, interest rates, and insurance premiums, along with trade policies that could change with the incoming federal administration.
One Solution: Outsource Unemployment Claims Management
As organizations seek to cut expenses without impacting product or service quality, many are finding the solution in an outsourced approach to unemployment claims management. They recognize that expenses like unemployment insurance (UI) taxes aren’t just an uncontrollable cost of doing business—and that outsourcing can drive down those costs significantly.
An outsourced unemployment claims program takes a strategic approach designed to win more claims upfront, which reduces the experience rating portion of your UI tax rate and the total tax paid. Some businesses don’t realize they have any impact over the UI tax rate; yet the right measures can reduce it to below the industry average for your industry in your state. One organization with 9,000 employees saved more than $4 million over a multi-year period through an outsourced claims management program that reduced its UI tax rate from 1.7% to 0.5%.
How Outsourced Claims Management Achieves These Savings
Outsourcing unemployment claims management can reduce your claims-related costs by focusing attention on the controllable portion of your UI tax rate: your experience rating. Your claims management partner will analyze how your UI tax rate is trending, assess how it compares to your peers in your industry and state, and develop a plan to reduce the rate over time.
Your claims management plan will include measures proven to help win more claims, both upfront and on appeal, reducing the experience portion of your UI tax rate. Winning more claims upfront further reduces costs by minimizing the time and expense of preparing for and attending appeal hearings.
For example, an outsourced partner will help you file more complete and compelling claim notice responses that result in a higher percentage of claims won. If a case goes in favor of the claimant but shouldn’t, the vendor will prepare witnesses for the appeal hearing to increase the odds of a favorable ruling.
Another strategy for driving down unemployment claims costs is to choose an outsourced partner with a performance-based fee structure. When a vendor charges for the number of claims handled (the most common approach), the organization ends paying for activity, not outcomes. A performance-based fee takes the opposite approach: By tying compensation to results, it creates a strong incentive for the vendor to reduce the business’s UI tax rate and total claims costs.
Beyond delivering these measurable savings, an outsourced partner takes on the administrative burden of unemployment claims management, freeing your team to focus on strategic work. If your HR staff is stretched due to other important initiatives—or your claims volume is rising due to rapid growth—outsourcing this function ensures it’s managed proactively for the best possible savings.
Reduce Your Unemployment Costs By Partnering with UC Alternative
Organizations that partner with UC Alternative win more unemployment claims upfront and on appeal, reduce their UI tax rate, and improve their bottom line.
We take ownership of the unemployment claims function, applying our expertise, experience, and technology to capture more opportunities to lower your UI tax rate, and reduce claims costs. Our industry-first performance-based compensation model ensures we’re rewarded for results, giving our team a tremendous incentive to optimize your savings. In fact, many of our customers see savings of up to 40% or more.
Use our free online calculator to estimate your potential unemployment cost savings. Then request a consultation with UC Alternative to learn how we can help you achieve those results.
