All small businesses are required to pay unemployment taxes. Different SUTA cutoffs and different minimum and maximum rates can be confusing. PEOs can possibly lower your tax rate and save you time, money, or both.
Why PEO’s Help in an Uncertain Employment Environment
All small businesses, no matter the state they are located in, are required to pay taxes for unemployment (state unemployment taxes, or SUTA for short). The rates and the maximum amount the business will pay are different depending upon your state’s rules. Unfortunately for the employer, these taxes are charged directly to him and cannot be passed on to the employee. The amount charged is calculated based on a percentage of the wage an employee is due, and off the experience rate of your company. Usually the new company will start with a higher rate and can have this adjusted as each year goes on.
However, if the new company experiences layoffs or downsizing, the rate may increase to the maximum amount or cutoff. Each state has different SUTA cutoffs with different minimum and maximum rates. Taxes at this time are reported quarterly and paid directly to the state. So, knowing that small businesses can be adversely affected when losing employees, we would like to show how PEOs can smooth out the cost increase if you happen to find yourself in this position in today’s declining economy.
The PEO will work with small businesses as the co-employer of each employee, allowing PEO’s to become the employers of record in the state. PEO's can also calculate the state unemployment rate due for the business, in addition to filing and paying the taxes for you. If you have grown your business across state lines, this process is an extremely valuable time saver for you. Finally, and even more so in an uncertain employment environment, PEO’s may actually use their own experience rating. This can help as you may have to decrease your costs, but it will not affect the rate you pay through the PEO’s agreement.
Effectively, the PEOs offer you a rate that is less than your current rate, while they may be paying something less than that. Consequently, you immediately save money with a lower rate, and the PEOs sharing responsibility of experience won’t necessarily get socked with a huge SUTA increase during a time of downsizing. The PEO’s responsibilities vary from state to state, however the PEO’s advisors can help you understand just how they can assist, whether it’s time savings, money or both.
Bootstrapping: How Cutting Down May Be the Key to A Successful Small Business
The owners of any beginning small business know the meaning of bootstrapping; keep every penny, hold on to each dollar, and in general, save until the revenue is consistently flowing in. In this way you don’t have to worry about debt as you try and get your business off the ground; you can focus on revenue increasing tasks. The following are some things you may want to consider when creating your business plan.
Small Business Employee Motivation and how Professional Employer Organizations Can Help
Running a small business in this economy is tough enough as it is, but keeping your employees motivated can make your life a lot easier. One quick tip to keep in mind is to use an employee leasing company.
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