SUTA?
SUTA (State Act on Unemployment Tax) is a payroll tax that employers must pay legally for their employees. Its main goal is to provide benefits for displaced employees, and costs for companies in high-income areas are usually rising. SUTA rates are assigned every year to companies, and the tax owed quarterly.
Most claims for unemployment are paid with limited due diligence. There are cases where the payment of former employees cannot be avoided. On the other hand, there are situations where employees have no right to these funds. Knowing the difference and knowing how to prove it to local authorities, Can save the company thousands of dollars.
Protecting your SUTA rate
- Review unemployment benefits: employees are not entitled to state unemployment benefits if they left the company themselves. This can include dismissed for a legitimate reason. (a violation of corporate rules is a common reason for refusing a benefit)
- Reduce turnover: the faster you hire and terminate employees, the higher the SUTA rate. For medium-sized companies, it's best to transfer employees with marketable skills to a department that needs them instead of letting them go. Try to improve your reviews and hiring practices, focusing on hiring employees who are likely to stay a longer time. As a bonus, this means you will spend less time and money searching for talent. This will further reduce your operating costs.
- More effective termination management: The entire termination process should be well documented, preferably employing incremental procedures to improve employee performance. If your company can show that it has made every effort to help the employee. But they still violate the rules in the company. You have a much better chance of successfully fighting the unemployment claim. Unfortunately, clerical errors in claims for unemployment are quite common. Especially since there are so many of them that employees try to process them at some point. For example, they may receive a claim from another company or receive an unemployment benefit that has never actually granted. To avoid this, you must fully review each SUTA statement and report received.
What Never to do
All of the above tips are a great way to reduce SUTA costs. However, there are things you shouldn't do if you're trying to keep rates low.
- Incorrect classification of employees: Some companies try to lower SUTA rates by incorrectly classifying employees as independent contractors. In many cases, they improperly refuse other benefits employees are entitled.
- Get multiple account numbers: Each state has an agency that assigns SUTA account numbers to companies. Don't request multiple numbers and then switch all employees to the account with the lowest interest rate this year.
- Connecting employees: This method - usually larger, rich in cash - buys a company with a lower SUTA rate. They transfer their employees, with the reduced rate being used in addition to all other benefits of purchasing the company.
In summary, these practices are an illegal form of manipulation of the rates known as 'SUTA dumping.' If you are unsure if your method will be considered, SUTA dumping and may result in fines. Please contact us at AccuServe Payroll and talk to the company's legal advisor.
