The State Unemployment Tax Act (also known as SUTA) is a tax regulation at the state level that acts as a counterpart to the Federal Unemployment Tax Act. Essentially, SUTA is a payroll tax that employers must pay for each of their employees. Depending on the state in which your business is located, you may refer to this tax as SUTA or as the State Unemployment Insurance, as different states have different terms for this same essential function.
Understanding tax law is difficult and detracts from the work of an employer to grow, oversee, and expand their business. At Einstein HR, we offer wholesale human resources outsourcing services to handle the work of a full HR department. If you only need a few services, such as handling SUTA and other federal and local labor laws, we also provide employers the option of selecting a handful of HR and accounting services in an a la carte fashion.
Terms to Understand When Discussing SUTA
There are two primary terms to understand regarding the State Unemployment Tax Act: the state unemployment tax rate and the state taxable wage base. These two concepts interact to determine how much an employer owes in unemployment taxes per employee.
State Unemployment Tax Rate
The state unemployment tax rate is the percentage of payroll that is taxed for unemployment purposes. It should be noted, though, that every state has its own tax rate and that different employers in a state can fall under different rates. Additionally, a single employer may be assigned different unemployment tax rates over the course of their company’s existence due to several aspects, including experience and the industry in which they work. For example, most states use a “new employer” tax rate that is assigned to just-opened businesses, and that company’s rate may increase or decrease as they accrue more experience.
Taxable Wage Base
A more consistent term is the state’s taxable wage base. Though this varies from state to state, employers within a state are all subject to the same wage base. The wage base is the maximum per-employee wage that can be taxed for unemployment purposes. Regardless of a company’s industry or years of experience, that wage base will apply to them across the board. The only change that may occur with the taxable wage base is that the state has the option of adjusting the amount each year.
An Example of an Employer’s Taxes Under SUTA
Now that we understand the two crucial terms, we can provide an example. Let us say the following items are true for your company in your state:
- Taxable Wage Base: $10,000
- Unemployment Tax Rate: 5%
This means that you could wind up paying a maximum of $500 (or five percent of $10,000) in unemployment taxes for each one of your employees. Remember: the tax rate may change depending on the industry your company inhabits, the amount of time you have been in business, and other factors.
Einstein HR Can Help Your Business
If that amount of unemployment tax per employee seems high, do not worry. You may be a new employer with a limited amount of resources, and you may feel out of your depth trying to juggle SUTA and other labor and tax restrictions. You need help, but hiring an in-house, full-time HR and accounting staff may be cost-prohibitive (not to mention providing those employees with costly benefits packages).
Instead, look to a professional employer organization or HR outsourcing firm like Einstein HR. We can help you control costs, stay compliant with FUTA and SUTA, handle payroll and employee benefits administration, reduce risk, and more. Even better: we can do all of these things at a more affordable price than the cost of an in-house staff. The question then becomes not “can my new or small business afford Einstein HR” but “how can my business afford not to hire Einstein HR!”
The Growing Trend of HR Outsourcing
Using an HR outsourcing firm or PEO to handle your payroll, tax, benefits, and similar HR needs is a common strategy used by many companies in a variety of industries. In fact, the latest data from the largest association of PEOs shows that roughly 15 percent of all companies with between ten and 99 employees use HR outsourcing.
Companies turn to Einstein HR because we are less expensive than a full-time staff, we have experts on our team with decades of HR experience, we handle a wide range of HR and accounting services, and shifting these services to an outside firm frees employers up to focus on more important aspects of their business.
Join With Einstein HR Today
Let Einstein HR take care of your SUTA compliance issues. We provide prospective clients with a FREE quote with no obligation to take on our services. To get yours, call us at 770-962-1700, or fill out the form on our contact page and we will get back to you within 48 hours.
