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  • I got a call last week from a client who has only been with us for a few months. He started back in July of 2012 and just received his first few invoices from the new year. He was pretty upset that his state unemployment tax had gone up substantially compared to November and December. Being in the payroll business for about 20 years, and with this being about the tenth of these calls I’ve taken in January, I knew where this conversation was going to lead.

    The first question I ask is “Did you know about the State Unemployment Tax Authority (SUTA) wage cap?” In Ohio, the employer is only charged SUTA tax on the first $9,000 in earnings for each employee.

    In his case, all of his employees had earned that much by September. Except for his one new hire in October, his employees had already capped out and met the wage limit. In November and December he was only paying tax on one employee. In January, everyone starts from ground zero and is taxed until they reach that $9,000 limit again.

    The second thing we discussed was the number of claims he had back in 2010 and 2011. Yes…those claims stick with you for eternity. It’s like your bank account: once you write that check, the money is gone.

    I reviewed the list of claims from JP, our claims administrator. 2010 was a bad year for our client, as it was for almost everyone, and he had to lay off four employees. Our client told me that he brought them back to work after about eight months. But by then, then the damage was already done. He had just under $20,000 charged to his unemployment account. His unemployment rate went up in 2010 from 3.2% to 7% in 2013.

    Out client also mentioned something that really bothered me. He said that someone filed a claim, but he didn’t have time to fight it, so he let it go through. That was in 2011, and that claim had hit his account for $4000, and was still coming out. Because you only have 21 days to appeal a claim, he was out of luck.

    Now that he’s with GMS, he doesn’t have to worry about this. We take care of managing the claim from start to finish, with a minimal amount of his time.

    Do you know what your rate is? Do you know why it’s 3% or 8%? Do you know what your cost will be in 2013? Have you heard about the proposed federal legislation changed for 2014?

    Check back on our blog for a follow-up post on these topics, and share your thoughts in the comments below.

    “Finding Company Tax ID,” © 2010 Calita Kabir, used under the Creative Commons Attribution-ShareAlike 2.0 Generic license.

  • Many small business owners can tell you in a given day what they are paying for fuel in their fleet of vehicles, how much their labor costs are, what their inventory costs are, etc., etc., but most cannot tell you their Unemployment Tax Rate.

    No, it’s not because owners don’t care about the bottom line. More likely, this is because many business owners do not understand that Unemployment Tax is an expense that can be controlled.

    You can save time and money by partnering with a PEO to help manage your unemployment claims risk.

    The Factors of Unemployment Tax Rates

    There are many factors that make up the rate that a company is charged. For example, a seasonal work force and your company’s unemployment claims history can have a dramatic impact on what you pay.

    The Burden of Unemployment Tax Rates

    High unemployment tax rates can become a major financial burden on a company that, left unchecked, can prevent you from reinvesting in new equipment, new employee perks, and more. Your company also loses production hours dealing with the unemployment hearing process.

    The Solution to Unemployment Tax Rates

    Employing a Professional Employer Organization like GMS can assist in controlling this risk in several ways:

    • The use of strategic human resources solutions
    • Specific job descriptions to lay out expectations of performance
    • Employee handbooks to build a solid platform for any company structure
    • Provide guidance to navigate the ever expanding and difficult world of employee relations
    • Provide back office assets to assist a business owner during the hearing/claim process

    In the State of Ohio, the home state of GMS, the average win rate of employers fighting unemployment claims is about 50%. By contrast, in the past year, the success rate for GMS was over 90%.

    Give us a call today at 888-823-2084 or contact us online to explore how GMS can make your business simpler, safer, and stronger!

  • As far as titles go, I know this one isn’t too catchy. I mean, we all know the taxman’s coming. He always is. What else is new? Nothing yet, but if President Obama’s proposed fiscal year 2016 budget goes through unscathed, a lot may be new according to Thomas and Thorngren.

    Learn how the proposed Fiscal Year budget could affect your unemployment taxes.

    How the Budget Would Affect Your Unemployment Taxes

    As an employer, you’ve been paying unemployment taxes (as have your employees). You’ve been paying 0.6% on the first $7,000 of employees’ income for your federal unemployment taxes (FUTA). Your state unemployment (SUTA) varies from state to state, and is based on different income levels. If the President has his way, there will be a lot more uniformity.

    In 2016, the budget proposes an increase from 0.6% to 0.8%, effectively raising every employer’s FUTA by $14 per employee. Not too big a deal, right? The big deal happens in 2017 when the Federal Government would lower the rate from 0.8% to 0.165%. Sounds great, but here’s the catch: The FUTA taxable wage limit will go from $7,000 per employee per year to $40,000 per employee per year. That calculates to $66 per employee per year or a 57% increase over what you’re currently paying.  

    Here’s the real kicker. The Federal Government will then mandate that every state raise their taxable wage limit to $40,000 per employee per year. Here in Ohio, the current taxable wage limit is $9,000. In fact, all but two states, Hawaii and Washington, would see their limits increase, some very significantly.

    Obviously, most states will adjust their rates accordingly so as not to become too large a burden on businesses, but what that number ends up being is anyone’s guess. Are you prepared for this massive increase? Even if this doesn’t go through, wouldn’t it make sense to get a hold of your unemployment costs now and try to get them to as low a level as possible? If you’re like most small business owners, you’re thinking that unemployment costs are what they are and there’s nothing you can do about it. Like a lot of other business owners, you may be wrong.

    Preparing Your Business with a PEO

    There are ways to control these costs. One is to never lay off or fire anyone. If that’s not probable, you may want to consider working with a Professional Employer Organization. Contact us today to see how partnering with a PEO can benefit you and your business.

  • Employees play a massive part in the success of your company. Of course, this also means that a bad employee can also lead to potential inefficiencies and other issues. 

    Firing an employee is a difficult reality of running a business. While the situation is unpleasant for everyone involved, there are right and wrong ways to go about the termination process. In fact, there are several steps you need to take before, during, and after you fire an employee. Here’s what you need to know to take the right route during the termination process.

    An employee gathering items after being fired by a small business owner. 

    What to Do Before You Fire an Employee

    Firing an employee is typically more than a one-day process. There are several actions you’ll need to take before you effectively terminate an employee to help protect your business and provide proper feedback. Depending on the employee, some of these steps may even help you improve their performance and save you from severing the relationship.

    Distribute an employee handbook

    Long before you plan to fire someone, you should make sure that every one of your employees receives an employee handbook. An updated handbook is an official document that makes the following details very clear for your employees:

    • Company philosophy
    • Conditions of employment
    • Company policies and procedures
    • Compensation and benefits

    Your employee handbook plays an important dual role for your business. First, it’s a great way for new hires to learn more about the rules, perks, and personality of your business. Second, it’s a compliance tool to make sure that your employees know and understand internal policies and grounds for dismissal. Having these rules in place – along with documentation that your employees have received your handbook – will help protect your business in case a fired employee tries to fight their dismissal in court.

    Review past performance reviews and feedback

    Before you decide to dismiss an employee, look back to see what type of feedback he or she has received in past reviews. If your employee has only heard good feedback and received raises that correspond with exemplary performance, a dismissal would come as a huge shock. 

    Not only do employee performance reviews give you a chance to set goals and expectations for an employee, they can also help protect you against claims if you’ve shared feedback indicating that an employee needed to improve. If there are no negative reviews on record, you may want to wait until you can provide some honest feedback. This way your employee may take the review as an opportunity to improve. If he or she doesn’t, you have evidence that both you and your employee knew of the continued poor performance so that you can back up your decision to terminate an employee.

    Document violations and give official warnings

    Like performance reviews, it’s important to have a documented history of any warnings or violations for any employee you decide to fire. Once it has become apparent that an employee’s performance is simply not up to standards, call them into a private space and give that person an official warning.

    It’s important to make sure that this warning is also in writing. While you explain why you’re unhappy with your employee’s performance, there should also be a printed document that the employee can sign so that you can place it in that person’s personnel file. You can also use a performance improvement plan that lists set goals for an employee to achieve within a set period of time (30 days, 90 days, etc.). Either of these options will make it clear exactly why the employee is at risk of losing his or her job and will help you back up your case as to why they needed to be dismissed.

    What to Do On the Day of Termination

    After you’ve taken the appropriate steps to give an employee an opportunity to improve and document reasons for dismissal, it’s time to act quickly and terminate the offending team member.

    Don’t wait for Friday

    While some situations call for immediate dismissals regardless of the day, certain days can be better than others if you can plan ahead. According to The Balance Careers, it’s generally best to try and aim for sometime in the middle of the week to fire an employee, preferably on a Tuesday or Wednesday. 

    Firing someone on a Monday can lead to the terminated employee feeling as though you wasted his or her time waiting until a new week has started. Friday dismissals leave the terminated employee to stew about the decision over the weekend. Aiming for the middle of the week can help mitigate bad feelings in an already difficult situation.

    Fire employees in person

    Firing an employee is already an unpleasant situation – don’t make it worse for the employee by terminating them via phone, email, or some other electronic means. While the experience will likely always be painful, it’s important to be as humane as possible when firing an employee. That approach means giving them the courtesy of hearing the news from you or another appropriate person at your company. 

    Not only is a face-to-face firing the right thing to do, it also looks much better than the alternative. Taking a less personal approach can leave a negative impression for other employees when they learn about the dismissal, especially if someone was friends with the terminated employee. As such, a personal approach can lessen the odds of not only bad reactions from terminated employees, but also any concerns from the coworkers they left behind.

    However, an in-person approach isn’t necessarily feasible if you need to fire a remote employee. While you may not be able to sit in the same room with these people, it’s still good to break the news face-to-face through some form of video conferencing platform.

    Don’t fire employees by yourself

    It’s always a good idea to have another person in the room if at all possible. Whether it’s an HR specialist or another employee, a second person serves as a witness. Unfortunately, there’s a chance that your former employee may try and accuse you of an unjust firing. Having an HR professional in the room can help you stay on track during the dismissal process to avoid any potential issues. Even if you don’t have an HR expert available, a second person gives you another person who can attest to your side of the story in case the former employee makes any false claims during your meeting. 

    Keep it short and simple

    When it’s time to fire someone, it’s best to avoid any small talk and get straight to the point. Tell the person directly that he or she has been terminated. Make it very clear that this decision is final and give very specific feedback as to why you and the company made this decision. 

    As you may expect, this isn’t a happy occasion and the fired individual likely won’t take the news well. However, it’s important to listen to what your former employee has to say to get a better read on how he or she takes the news. Whether they’re angry, sad, shocked, or in denial, continue to repeat the message and treat them with respect.

    This is also the time to cover next steps and what will happen involving their final pay, benefits, and other details. At this point, you’ll be able to discuss any terms for severance pay, extended healthcare, or other benefits if you choose to offer them. You can also ask the individual to sign a release of liability.

    Collect any work-related items

    Depending on your business, you may have provided your former employee with equipment ranging from small supplies to extremely expensive items. You’ll want to collect any company property from them before or during the individual’s last day, unless there’s an agreement in place to allow that person to keep certain goods. These items can include:

    • Keys or key cards
    • Laptops
    • Credit card
    • Cell phone, tablet, or other mobile device
    • Company car
    • Miscellaneous office equipment

    In addition to physical items, you also need to address passwords, codes, or any other means of company access. If certain doors at your company are unlocked by keycodes or other card or keyless means, change those codes. Likewise, either you or someone else at your company should restrict any user access and change any passwords the dismissed employee may use to access your computer network.

    Likewise, your former employee likely has some personal items that he or she will want to take home as well. If you schedule the termination meeting for the end of the day when most of your other employees are gone, the dismissed employee can gather their own possessions without as much fear of embarrassment. Of course, you may want someone there to watch just to ensure that the  employee doesn’t take any company property. You can also ask terminated employees to provide a list of their personal property so that someone else can gather their possessions and return it to them there or someplace outside of work at an arranged time in the future.

    Escort them out and end on civil terms 

    After both parties have collected all the necessary items and are ready to go, it’s time to wrap up the termination meeting. Personally walk the individual to the exit and wish him or her well in the future. The dismissed individual may not be in the best mood, but it’s good to part ways on a gracious note.

    What to Do After You’ve Fired an Employee

    While the hardest part of the termination process may be over, your job isn’t quite done. There are still some very important tasks to finish that involve updating everyone else in your team and protecting yourself in case the fired employee decides that the matter isn’t over just yet.

    Inform the office

    While it may seem easier to not address the departure of an employee, it’s best to be honest to your team. If you don’t say anything, other employees may lose trust in management and start to fear that there are more dismissals in store for the future. Word will quickly spread on it’s own, so you can shape the conversation and get ahead of the gossip with a quick message.

    Fortunately, your message to the rest of your company doesn’t need to be long and complicated. Instead simply you’ll want to focus on the following:

    • That the dismissed employee no longer works at your company
    • The transition plan for handling the former employee’s departure
    • That anyone with questions should feel free to speak to you or another relevant person

    Avoid saying that the employee was fired. It’s best to just say that the person in question is no longer at the company and shift toward the future. Also, refrain from making any critiques about the former employee. These comments may not sit well for his or her former coworkers, so it’s best to move forward.

    It’s also important to determine the right method and timing for sharing this information. If you have a smaller company or the former employee workerd with a close group of associates, an in-person company meeting is best. If your company is larger or the former employee didn’t work as closely with others, a termination email should be enough to suffice. You can also hold an in-person meeting with closer associates and follow up with an company-wide email as well if you want to break the news to a certain group first.

    Reassign duties

    Part of the transition plan for handling your former employee’s departure involves addressing how that employee’s duties will be handled in the short- and long-term future. This can involve delegating who will pick up the slack until you have a more permanent solution in place. If the employee received regular emails or calls from clients or customers, have those messages forwarded to someone else in the organization.

    You also want to be careful about how you split up these duties – you don’t want to make a good worker bitter because she or she has to do the work of two people because of someone else’s dismissal. If you plan to hire someone new or put new processes in place to ease the overall burden of these duties, let your employees know. A bit of transparency will help reassure concerned employees and let them look ahead to the future instead of dwelling on the downsides of the dismissal.

    Be prepared for unemployment claims

    If the employee didn’t sign some form of liability preventing them from doing so, there’s always a chance that they may file a claim against your business. Unemployment taxes can cost your business thousands of dollars, and a claim against your company may lead to even more financial burden. 

    Fortunately, there are ways to protect your business from the claims and unruly taxes. A combination of maintaining good company policies and record keeping can improve your chances of winning unemployment claim cases. It also helps to have a dedicated company like a Professional Employer Organization on your side that can reduce your tax risks and help you fight against unwarranted claims.

    Consider a PEO for Employee Performance and Risk Management

    The firing process isn’t an enjoyable one, but it helps to have trustworthy, experience HR professionals by your side when you do need to dismiss an employee. Group Management Services can help you manage the entirety of the employee lifecycle, including employee recruiting and training, performance management, and unemployment claims management.

    Whether you’re dealing with employees, benefits, or payroll, HR management can eat up the majority of your schedule. GMS can help you take your time back while providing your business with professional services that protect and strengthen your business. Contact GMS today to talk to one of our experts about how we can help you support your business.