Unemployment Taxes Rise Dramatically

Business Survival Tip
Episode 24
By Carl Kleimann
January 6, 2010

Full Interview transcript

Carl: Hello business owners this is Carl Kleimann from Odyssey OneSource with another Business Survival Tip. Chances are, you recently received your state unemployment tax rate notice for 2010. And it is even more likely that your tax rate is up significantly over the prior year. According to the Bureau of Labor Statistics, the national unemployment rate reached 10 percent during the 4th quarter of 2009. In fact, all 50 states and the District of Columbia reported an increase in unemployment for 2009. Michigan reported the highest unemployment at 14.7 percent while North Dakota reported the lowest at 4.1 percent.

Each state is responsible for its own unemployment system and nearly every one of them is struggling to pay record unemployment claims. Many states, including Texas, have had to borrow money from the federal government in order to continue paying benefits. In order to repay these loans, states must either increase their unemployment tax revenue, issue bonds, or both. In Texas’ case, both methods will be used.

Texas for example, has nearly tripled its minimum unemployment tax rate from .26 percent to .72 percent and has increased its maximum tax rate from 6.26 percent to 8.6 percent. That means that even those employers who have not experienced unemployment claims will pay more. And those that have experienced claims may pay a lot more.

More than ever, it is important to actively manage your firms unemployment claims experience. Employers are likely facing years of higher unemployment taxes and those with the worst unemployment claims experience will suffer the most. So do everything possible to prevent claims and when they do occur, defend them vigorously. Remember, unemployment is an experience based tax. The more claims you lose, the more tax you pay.

I am Carl Kleimann and this has been another Business Survival Tip by Odyssey One Source, ranked as the number one Professional Employer Organization three years running by the Black Book of Outsourcing.
For more information on this and other issues affecting employers, please visit odysseyonesource.com.