Employment Issues: How Unemployment Affects Your Business
Posted on Thu, Mar 17, 2011
By Koleen Singerline
Since January of 2009, the state unemployment rate ranged from
8 percent to over 10 ten percent. Consequently, the state paid $6.4 billion in benefits while only collecting $4.1 billion in unemployment taxes over the past two years, forcing New Jersey to borrow $1.75 billion from the federal government. With employers expected to cover the shortfall through unemployment taxes ranging from 0.4 to 5.4 percent of employee wages up to $29,600 per employee in the coming year and the uncertainty surrounding the state’s repayment of borrowed federal funds, the true financial impact of this damaged process is yet to be determined.
We’ve already shown you how a single mother with three young children who is laid off from her job of two years where she earned $40,000 can actually realize more net income by collecting unemployment benefits than by going back to work. The unemployed continue to be eligible for multiple extension periods under the new laws. The only change has been reimbursement for health benefits by the Federal government. This benefit was dropped for 2011.
The increasing cost of unemployment to employers coupled with the reluctance of the unemployed to return to work, leave businesses with two real problems:
* Minimizing Unemployment Tax
* Finding Key Employees
Both of these issues can be addressed by including the use of temporaries in your staffing process.
Minimizing Unemployment Costs:
1. If a temporary or temp-to-hire worker is not working out or has completed your project, ending their assignment has no impact on your unemployment payments. The burden of unemployment falls to the Staffing Agency. Since employment agencies regularly deal with work terminations, they have developed strategies to manage the costs.
2. The salary of a temporary worker is not included in your wage and hour report, so you are not paying any state or federal taxes on that wage.
Finding Key Employees:
1. As business picks up, many companies are finding their current employees are maxed out in terms of what they can handle. A new hire might be needed, but the business is still unstable and the future is uncertain. A temporary employee can join the team quickly and is instantly ready to go to work.
2. Staffing your company with a core group of key employees, surrounded by a ring of temporary workers, gives you a pool of trained and qualified workers from which to choose permanent employees as your company grows.
Our economic situation leaves no room for hiring errors. It’s important that the hiring process is conducted in a careful way that maximizes your chance of finding the perfect person and minimizes associated costs such as unemployment taxes.