For Unemployment Claims Management, Performance-Based Pricing Outshines Volume Pricing in 7 Ways
Many organizations are outsourcing their unemployment claims management for a variety of compelling reasons: to reduce costs by winning more claims, avoid missteps and oversights that result in expensive penalties, and offload work from their lean HR teams. By removing the burden of unemployment claims, HR professionals can focus their time and resources on strategic initiatives—like talent development, retention, and business growth—rather than getting caught up in administrative complexities.
As you evaluate unemployment claims management vendors, you’ll find two starkly different fee models: performance based and volume based. These compensation models differ in seven critical ways that impact your organization’s operation and bottom line.
1. Fee Structure
A volume-based pricing model works just like it sounds: The vendor’s compensation is based on the number of claims they handle, regardless of the outcome. Providers that use this model typically charge a flat fee per claim.
A performance-based model flips the script by tying the vendor’s compensation to the outcome of their work. The more claims the vendor helps your organization win, and the lower they bring your unemployment insurance (UI) tax rate, the more they earn.
To establish appropriate performance goals, the provider benchmarks your UI tax rate against the average, best, and worst for your industry and state, then uses this data to develop an outcomes-based program and associated fees.
2. Incentive Structure
A volume-based compensation model provides little or no incentive for the vendor to improve your unemployment claims win rate or UI tax rate. Because they earn the same fixed fee per claim—whether it’s won or lost—the provider views each claim as simply a transaction to complete.
A performance-based model creates a significant financial incentive for the vendor to win more claims upfront and on appeal, and to reduce your UI tax rate to the lowest possible for your industry in your state. Now, the provider views every claim as potentially winnable. And they take every measure feasible to make that happen, by impacting the controllable portion of your UI tax rate: your experience rating.
3. Vendor Accountability
A volume-based fee model doesn’t hold the vendor accountable for anything other than processing claims per the contract terms. In the world of unemployment claims management, that’s table stakes.
A performance-based compensation shifts accountability for achieving better unemployment claims outcomes to the vendor. They take ownership of the claims function—improving results and freeing your HR team to focus on higher-value work.
4. Risk Allocation
Under a volume-based pricing contract, the employer assumes most of the risk because you pay the same per-claim fee, regardless of results. If the vendor doesn’t reduce your unemployment-related costs by helping you to win more claims and lower your UI tax rate, you’re still on the hook for the same fees.
A performance-based contract shifts some of the risk to the vendor. Since their compensation is tied to their performance—based on measurable goals you mutually agree to—they’re at risk financially if they don’t deliver.
5. Savings Potential
The opportunity to reduce costs is a prime reason for outsourcing unemployment claims management. Yet, under a volume-based fee model, the vendor’s work doesn’t necessarily translate to a measurable cost reduction.
A performance-based model can reduce your unemployment claims-related costs substantially—up to 40 percent or more. With a strong incentive to achieve better outcomes, the vendor leverages the three elements critical for improved performance: proven processes, advanced technology, and a team with deep expertise in unemployment claims management.
The savings can add up quickly, even for mid-sized businesses: If you have taxable payroll of just $10 million, and the vendor helps reduce your UI tax rate from 4% to 2%, you could see your annual UI taxes drop from $400,000 to $200,000. With the average unemployment claim payout totaling $4,200—and many exceeding $12,000—every claim the vendor helps you win greatly impacts your experience rating, UI tax rate, and tax obligation.
6. Approach to Your Business
A volume-based claims management contract encourages the vendor to take a short-term view and a reactive, transactional approach. Their sole focus is to do what they’re compensated for: processing claims as they come in, checking them off the list.
Performance-based pricing does the opposite: It encourages the vendor to achieve long-term, sustainable results by proactively implementing a strategy for winning more claims and reducing your UI tax rate. The provider serves as a true partner—fully invested in your success and motivated to maximize your unemployment claims savings.
Leading Organizations Choose UC Alternative’s Performance Fee Model
The measure of success for unemployment claims management shouldn’t be the number of transactions processed; it should be the business outcomes delivered. That’s why leading organizations partner with UC Alternative and leverage our performance-based fee model—to reduce their UI tax rate by winning more claims, generating greater savings.
UC Alternative is the only unemployment claims management provider compensated based on performance. This unique fee structure gives our team a powerful incentive to win more claims upfront and on appeal and reduce your UI tax rate below the industry average for your state. From helping you file complete, compelling, and timely claim notice responses, to preparing your team for hearings, and much more, we take proactive steps that impact the controllable portion of your UI tax rate. And we diligently track our progress against your goals, so you always know how your program is performing.
When you outsource unemployment claims management to UC Alternative, you gain a partner with decades of experience, rigorous processes, and advanced technology, all working together to deliver superior results. Every member of our team is invested in your long-term success and committed to driving more bottom-line savings.
Ready to learn how our performance-based pricing model can deliver measurable benefits for your organization?
Download our CFO’s Guide to Reducing Unemployment Claims Costs Through Performance-Based Pricing.
Use our ROI Calculator to get an initial savings estimate.
Schedule a free claims savings projection analysis, personalized to your business.
| Factor | Volume-Based Pricing | Performance-Based Pricing |
|---|---|---|
| Fee Structure | Fixed fee per claim processed | Fees tied to performance metrics (e.g., UI tax rate reduction) |
| Incentive Structure | Little/no incentive for vendor to perform better | Significant incentive for vendor to deliver better outcomes |
| Vendor Accountability | Accountable for processing claims | Accountable for improving claims outcomes |
| Risk Allocation | Primarily with employer | Shared between vendor and employer |
| Savings Potential | Limited | Significant (up to 40% or more) |
| Approach to Your Business | Transactional, reactive, short-term | Strategic, proactive, long-term |
