This is the third post in a seven-part series on anticipating and handling growth in the second half of 2011. For the whole series, click here.
Is your staffing business ready to meet the needs of businesses experiencing growing demand? Being able to handle growth isn’t an accident; it’s the result of a step-by-step plan that puts your business in the best possible position to deal with any change in the economy.
Step 2: Be Prepared for New Developments
Recent changes brought about through legislation and economic circumstances can affect staffing firms more than other businesses. Be sure you know what’s coming in addition to growth. Today, we’re examining the tax charge that affects every staffing firm: the Federal Unemployment Tax Act charge, FUTA for short.
There’s a great deal of uncertainty surrounding FUTA charges. As of this month, 29 states with unemployment insurance trust funds have an outstanding debt to the federal government. At 3.92 percent on an estimated $40 billion in loans, interest alone is estimated to cost more than $1.5 billion this year. And states must come up with the revenue to cover the interest; they are forbidden by law from paying it out of their existing unemployment trust funds.
If these states cannot pay the interest on these loans by September 30 of this year, they will begin to lose their FUTA credit at a rate of .3 percent a year. This may be affecting your state already: Indiana and South Carolina’s FUTA rates are now 1.1 percent and Michigan’s rate is 1.4 percent.
In the more immediate future, the current FUTA rate is scheduled to drop from 6.2% of an employee’s first $7,000 to 6.0% on July 1. Because the federal government would still apply a 5.4% credit, the actual cost to employers would drop from .8% to .6%. That’s a 25% reduction. We’ll keep you posted on any changes to your FUTA rates.
In the coming weeks, we’ll talk about more issues on the horizon that pertain to staffing and how to market your staffing firm without breaking the bank. If you have any thoughts or questions, please don’t hesitate to leave them in the comments!