As the name implies, the State Unemployment Tax Authority, or SUTA, concerns the state unemployment tax. All small businesses are required to pay this tax, and the amount charged is calculated based on a percentage of the wage an employee is due, and on the experience rate of your company.
There are several reasons your company might have high SUTA costs:
Negative Unemployment History. Are you an employer with an unfortunate experience with unemployment in the past? Most likely, your SUTA experience rating reflects that.
Startup Business. Are you the owner of a new company? New businesses start with a higher SUTA rate and can have this adjusted over time.
Downsizing. Is your company experiencing downsizing? Employee turnover can have a drastic impact on SUTA expenses, particularly for companies with relatively low wages such as restaurants and hospitality-based businesses.
Seasonal or Cyclical Industry. Perhaps you operate in a cyclical industry, such as manufacturing or construction. Frequent layoffs mean higher rates, as your company is more likely to be responsible for an employee filing an unemployment claim.
Regardless of the industry, location, or age of your business, if you are paying high SUTA taxes, it may be worthwhile to consider a Professional Employer Organization (PEO). APEO will work with your company as a co-employer, which allows the PEO to become the “employer of record.” A PEO can also help direct employee hiring, disciplinary actions and terminations in a way that limits your exposure to unemployment claims. This helps shift the responsibility for unemployment claims from your company to the PEO.
PEOs may then actually use their own experience rating when calculating SUTA taxes. Some companies may notice a significant decrease in their taxes this way. The SUTA tax is variable, and can be changed at any time, which can be confusing to employers who do not fully understand it. PEOs will calculate the state unemployment rate due for your company, and will file and pay the taxes on your behalf. Rates vary from state to state, so if you are operating in more than one state, outsourcing this task also can save you significant time and resources.
To find out more about how a PEO can benefit you, call 1.800.771.7823 to speak with a Staff One representative, or contact the author directly at email@example.com.