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Understanding and controlling the unemployment tax costs of your business

Employers must pay federal unemployment tax on amounts up to $7,000 paid to each employee as wages during the year. The tax rate is 6% but it can be reduced by a credit for contributions paid into state unemployment funds. Typically, the more claims made against a business, the higher the unemployment tax bill. But there may be ways to control costs. Don’t hire employees to fill short-term jobs. To avoid layoffs, use temps. If you must hire, do so carefully to increase the chance that employees will work out. And if you terminate someone, provide severance and outplacement services, which may delay the start of unemployment benefits and cause them to end sooner. Contact us for more ideas or if you wish to use our payroll services.