Last week we provided business owners with a brief introduction to SUTA; this week we are reviewing the importance of understanding and reviewing the State Unemployment Tax Authority regulations and rates BEFORE engaging in a new PEO relationship.
SUTA tax is required in every state and rates are updated annually. Each state mandates its own SUTA regulations, which involves determining the amount of wages subject to SUTA tax and what the minimum and maximum rates are. Businesses operating within multiple states are required to pay SUTA taxes in each state where they have employees.
For businesses engaging in the PEO relationship, PEO tax laws also vary per state. Rates are calculated based on actual wages paid to the employees, and the unemployment rate of the company. Although PEOs are considered employers of record with the state through the co-employment relationship, in some states, the government mandates that even under the co-employment relationship, the rate must be based on the client’s rate (not the PEOs). In other states,
clients engaged in a PEO relationship must pay the PEO’s rate, regardless of whether or not it is higher than the client’s existing rate. And, some states
permit you to choose which rate you would like to take advantage of, reducing your overall tax liability by selecting the best option.
Why is this important?
When shopping for a PEO, you may not have time to conduct all of this research (This involves reviewing the PEO’s advantages, the pricing on various HR services, the state laws surrounding the PEO relationship/SUTA liability in each state you have employees and the PEO’s existing SUTA rates. Then, you’ll have to compare all of that information against what an alternative PEO’s options are.)
How is SUTA calculated? Who is responsible for paying SUTA? Does the PEO present an opportunity for savings? Selecting the RIGHT PEO for your business requires industry knowledge and adequate time for interviewing all the candidates. Not taking the appropriate amount of time to review a PEO’s details as specific as SUTA compliance could result in losing a substantial amount of potential savings each year.
At PEO Advantage, we are real business partners, focused on selecting the RIGHT PEO for you, though our systematic yet personal approach. From the
in-depth evaluation and independent references to translating complex PEO quotes into easy-to-read comparisons complete with cost and savings details, we
manage it all. Plus, we monitor results and conduct annual reviews so your HR solutions deliver value year-after-year (even as SUTA rates and regulations
Additional Resources: SUTA Tax Rates by State