2014 FUTA Rates by State

Florida has adopted changes to the way employee leasing companies (also known as Professional Employer Organizations or PEOs) may pay and report contributions for state unemployment taxes. With the new rules, employee leasing companies in Florida are allowed to make a one-time election to use the unemployment rate (for non-internal employees) of each individual client rather than a single rate established for the whole employee leasing company. Under the client level election, the unemployment claims and tax payments may now be done using the tax identification number of the employee leasing client rather than the tax ID of the PEO.Florida Unemployment client level rating option for PEOs

Why the Change

Prior to this new rule each PEO was committed to use their own unemployment experience rate all the worksite employees of all their clients. Throughout the recession the number of unemployment claims has risen dramatically. Remember, unemployment taxes are a cost to the employer and every unemployment claim eventually gets charged to the employer. Learn more about ways employers can reduce Unemployment Insurance and SUTA costs.

With the growth in unemployment claims the SUTA rates for many employee leasing companies have risen to the Florida
state maximum unemployment insurance rate of 5.4%. (see SUTA rates by state)

The affect of this rising rates has in turn forced a tax rate burden on the employee leasing companies that is higher the rate a potential PEO client might pay of they decided not to engage a PEO. For example a new business starting in Florida would only be required to pay a 2.7% rate if the were handling payroll and HR on their own, but under the old rules the PEO would need to charge the maximum rate (their current experience rate from the state) for those same wages. PEOs have long been an efficient and effective way for new businesses to handle HR, payroll, tax compliance and offer employee benefits. This situation had the affect of increasing the price for the valuable suite of services to the very business that can benefit the most from using a PEO.

Other states have already adopted the one-time election model that PEOs must use for reporting their SUTA. Florida joins at least eight other states that allows a PEO to elect either PEO or client level reporting for state unemployment taxes.

Employee Leasing Companies – Full Florida Senate Legislative Details for UI changes

Impact for current PEO clients

PEOs in Florida were to make their election regarding moving to client level SUTA reporting in July of 2012. After that date each PEO has been committed to one reporting method or the other. For current Florida clients of a PEO there may be no immediate impact or action needed. However, every all current Florida clients of an employee leasing company should ask how about which election was chosen by their PEO and furthermore, whether a Florida form DR1 was completed by their employee leasing company on their behalf. If your current PEO elected to move to client level reporting, the Florida DR1 form was completed on your behalf to establish a UI account and may have be done by your PEO. If this form has been completed on your behalf and an account established with the state under your companies FEIN, you need to be aware that you will now start to track your own experience rate for UI claims and all future unemployment claims will affect your own experience rating and not the rating of the PEO.

Impact for business considering joining a PEO

Companies considering joining a PEO may now avoid the “cutoff penalty”. Before the ability of a PEO to use client level SUTA reporting, companies that wanted to join a PEO in mid-year may have to “start over” with making their SUTA contributions. In effect it was as a financial disincentive to move to a PEO at any time other than the start of a new fiscal year, when all SUTA contributions are “restarted”. With the client level reporting election, a PEO does not need to collect SUTA contributions, if the prospective client has already reached their annual SUTA cutoff amount ($8,000 in Florida in 2012). This eliminates a double SUTA hit when joining a PEO in midyear.

Clients of any PEO or clients considering joining a PEO may call StaffMarket for more information about how state unemployment taxes are handled.

Unemployment Insurance Funds Are Broke

As of December 2010, 26 states have Unemployment Insurance funds that are insolvent and are borrowing money from the federal government. Current state borrowing to cover UI payments is over $30 billion. See this website to see if your state UI funds is in trouble: Unemployment Insurance Tracker.
As politicians keep extending unemployment benefits the situation continues to get worse. In fact many UI funds have not even paid off loans from the borrowing done in the late 1970s. This means is that UI funds in 2011 and beyond will be forced to raise the SUTA taxes charged to business throughout the USA. Remember that UI costs are paid by businesses. Nearly every company will be forced to pay higher State Unemployment Taxes, even if they have never laid-off anyone. Every company needs to take steps to minimize the coming impact of higher SUTA expenses.
State UI funds borrowing more money than ever.

Government Writing Checks that Business Owners will Pay

Even if the unemployment situation of the last several years starts to improve, the tremendous debt incurred by most states UI funds must be repaid to the federal government. Where will they get the money? You guessed it, increased State Unemployment Taxes (SUTA) charged to business owners. The politics of taxation will create a battle over how to recover the tax funds shortfalls. Battles are coming over who should pay more.

States have options for collecting more SUTA taxes including:



• Increase the SUTA wage base

This method affects virtual all businesses.

• Increase the SUTA minimum rate

This method affects long time busineses that have worked hard to develop a SUTA experience rate and keep low by holding on to their employees.

• Increase the SUTA maximum rate

This method will collect more from companies that have already let go lots of people. Many of these companies may decide to cease operations if the SUTA rate increases make them uncompetitive.

• Increase the SUTA new business rate

This method affects all start up business and is unpopular since it discourages new busniness formation.

• Make special assessments for business

Anything can happen with this, but it does give new businesses a break and punishes existing businesses.

Whatever method or combination of methods the states eventually select, the fact is Unemployment taxes will increase.

How A Company Can Reduce Unemployment Insurance and SUTA costs

With UI costs bound to increase, now it a great time to consider the factors that drive SUTA costs and take action to address the subject. Many people, even lots of business owners really have no idea how SUTA costs are actually calculated. To understand how to reduce these costs, you must first understand the math involved with the calculations…. it is not hard. See our link here to:
Learn how UI and SUTA business taxes are calculated.

What is the financial impact of a UI / SUTA increase for your company?

StaffMarket has created a tool that your company can use to estimate the financial cost impact from a UI/SUTA tax increase. i.e. I your SUTA rates goes from 2.7% to 3.7%, how much money will it cost your company? In addition, the tool demonstrates the cost impact of employee turnover. Turnover can be a signficant cost factor in increased UI and SUTA costs. The SUTA turnover calculator can help you estimate what employee turnover is costing your company in additional annual State Unemployment Taxes. Call us if you have any questions about it. Click here for the link to use our:
SUTA cost and turnover estimator.