When it comes to abiding by the State Unemployment Tax Act (SUTA), most employers dread the costs and burden of filing these tax returns and managing the claims process. But, did you know that a PEO (Professional Employer Organization) can help employers ease this burden? If you’ve been considering enlisting the services of a PEO, here are some things to consider unemployment and working to reduce SUTA tax costs.
How Can Employers Reduce SUTA Tax Liability?
A company’s SUTA taxes are calculated from its assigned SUTA rate multiplied by its wages paid that are subject to SUTA taxes. An employer’s SUTA rate will vary from state to state and will be determined by the employer’s claim history, with higher benefit payouts resulting in higher rates. On the other hand, the wage base in a given state is determined by that state and will generally apply to all employers in that state. A reduction of either component can bring down SUTA tax costs. However, employers usually have more ability to influence their rate due to a lack of flexibility to change the states where their job sites are located.
Since businesses with high employee turnover and low wages will often have the most financial impact on SUTA costs, some simple ways employers can see a decrease in their rate is by avoiding terminations and layoffs when possible and following a high standard of HR practices, including employee performance reviews and properly documenting terminations. These good practices can be of assistance when contesting questionable unemployment benefit claims made against the company.
How a Good PEO Can Help
While individual states have differing rules for how SUTA practices are handled when a company joins a PEO, there are many states (including Tennessee) where the PEO client’s wages are reported under the Federal Employer Identification Number (FEIN) of the PEO, using the PEO’s combined experience rating and corresponding SUTA rate.
The PEO handles the administrative burden of the filing of tax returns, tracking rates, filing returns, maintaining data, and providing claims information to states in the event of a dispute. In addition, a good PEO will offer professional expertise to assist their clients with implementing sound HR processes such as employee performance review and proper documentation of termination. All these procedures can result in less paperwork for the PEO’s clients and a favorable combined SUTA rate for the PEO. When selecting a PEO, please be sure to inquire about any combined rates which will now apply to your company.
Interested in learning more about how LBMC Employment Partners can help your business with SUTA taxes through our PEO services? Contact us today!
All content and services on this page are offered by LBMC Employment Partners, LLC. LBMC Employment Partners, LLC, is part of the LBMC Family of Companies and is an independent entity with services and products being provided exclusively by LBMC Employment Partners, LLC.