Texas PEO Group understands the complexities of the unemployment system in the U.S. and Texas and will work with you to find the best PEO fit for your business.
The United States unemployment insurance ( UI ) program is designed to assist unemployed workers for a short time while they seek new employment. It is also intended to help stabilize recessions. These taxes were created by congress and are part of the Social Security Act of 1935. Currently there are two taxes an employer must pay.
FUTA stands for Federal Unemployment Tax Act
All U.S. employers must pay FUTA taxes. FUTA tax is calculated on the first $7,000 of a worker’s annual pay. Prior to July 1, 2011, all employers required to pay FUTA paid 6.2% on the first $7,000 of an employee’s income. On July 1, 2011, the rate decreased to 6.0%. So the tax on any employee that makes $7,000 or more during an annual period is $420.00.
SUTA is an acronym for State Unemployment Tax Act.
Each state in the country has a department that administers unemployment compensation. Of the two types of unemployment tax, SUTA tax can vary greatly from state to state and employer to employer. The Texas Workforce Commission sets minimum SUTA rates for start-up businesses as well as the annual rate for each business established for more than two years.
Unlike FUTA rates that have remained relatively consistent for many years, SUTA tax rates can change wildly based on how much money your state pays out in unemployment insurance to former employees laid off from your company during the prior year.
For 2011 Texas SUTA rates are based on the first $9,000 of an employee’s annual compensation.
Texas has a very complicated formula for determining a company’s ongoing SUTA rate. Employers have been very surprised during the last several years at the large increases they experienced even if they only had 1-2 unemployment claims made against them.
For Texas start-up companies the 2011 minimum SUTA rate is 2.7% of the first $9,000 of payroll
For Texas employers that don’t have a high unemployment claims rate the minimum 2011 tax rate is 0.78%. The maximum Texas SUTA tax rate for 2011 is 8.25%.
Why a good PEO helps you manage your SUTA rates
PEOs pool the tens of thousands of employees they are managing for their employers. Their state SUTA rates have the benefit of large numbers and also professional SUTA claims handling.
Managing SUTA claims keeps SUTA rates low.
Every PEO that Texas PEO Group works with has a significant full-time staff highly experienced to help you terminate employees so if the termination occurs because of cause your company has documentation that will help lessen your chance of having a paid unemployment claim.
Their staffs work with legitimate laid off workers to insure that they are doing everything required by the Texas Workforce Commission to continue receiving unemployment insurance. This helps eliminate a great deal of unemployment insurance fraud by your workers and saves you money during the next year when your SUTA experience rate is adjusted.
PEOs that Texas PEO Group associates will also attend Texas Workforce Commission unemployment insurance denial hearings with you and act on your behalf in a disputed unemployment insurance claim hearings.
During the days of low unemployment an employer had the luxury of not worrying about the cost of SUTA, but some economists believe that our high unemployment rate will remain for as many as 7-10 more years. As a result, employers must now consider ways to manage their unemployment claims in such a way as to minimize their potential losses and prevent large increases in their SUTA costs.
Handling unemployment insurance claims can be time consuming and costly if you don’t manage them right. Call the Texas PEO group and let us show you a better way to manage the skyrocketing cost of unemployment insurance.
For more information please call us at (512) 697-9509 or complete our online form.