Almost all states start their rating years for unemployment taxes in July. That means that July is the perfect time to do a little account maintenance, as well as to make plans for the coming rating year. Here are just a half dozen things you can do:
1) Voluntary Contributions: About two thirds of the states are Reserve Ratio states. Nearly all these states will actually allow you to BUY a better rate with a Voluntary Contribution. This can be an extremely lucrative investment! I have seen where a company invested $1.65 in a VC in Ohio and saved over $3,800.00 in tax liability. You read that right. And it divides out to be a 2300-fold return on the investment.
Of course, not all VC's are as cheap as that. Would one help you? Now is the time to add up all your contributions and charges and consult the tax tables to find out how much a VC would cost to buy a better rate for you, versus how much that better rate would net you. If you need help understanding the Voluntary Contribution and how to take advantage of it, read the article Give a Little, Pay a Lot Less, right here in the articles archive.
2) Rate Verification: A wise man once said that there are three kinds of people in this world: those who can count, and those who can't. Often, those who can't could if they could just can't lay their hands on the data. Next year the state will send you a new Tax Rate Notice which will tally up all the rating factors and tell you what you have to pay. Unfortunately, this Rate Notice arrives at a time when financial people are the busiest, with holidays, year end, taxes, etc. They tend to lay the Rate Notice aside, intending to pull the data and check the figures later. By then, the time to protest the rate will have expired. So gather your data now. Get your last four quarterly UC returns, from the first two quarters of this year and the last two quarters of last year. Get all the benefit charge sheets and all the credits you have received since last July. Get your Rating Notice from last year. With these in hand, it should be possible for you to predict your rate right now, many months before the state gets around to sending it to you. When your notice comes in, you can simply compare figures in just a few seconds.
3) Plan for Expenses: Knowing your next year's rate means that you can pretty much predict what this tax is going to cost you. Have you have a lot of layoffs or bad claims? You may have to salt away some funds to cover the cost when this hits your account after the first quarter of next year. Are you in boom times? Your growing payroll may actually drive your rate UP, even though you are hiring instead of laying off, by increasing the required Reserve Account Balance to achieve the same Reserve Ratio. Know where you stand in time to plan.
1) Retrocrediting: Now that you have your data together, take a look: Did you ever apply for Relief from charges? Let's say someone quits from your employment, goes to work elsewhere, and is laid off from there. You are charged as a base period employer. You apply to get the charges taken off your account. Several months later, the state issues you a credit. If you have applied for this type of credit in the last two or three months, chances are that your credit has not yet arrived. But by the time it does, it will be applied to this new rating period, not the old one when the charge was incurred. You need to apply separately for "retrocrediting", to get this put on the expired rating period, or else you will have to pay for one year at too high of a rate. This is a technical. but very important strategy. If you need help, call in a professional cost control expert. It pays.
2) Claims Review: Take a look at your claims history, too. Now that you have your charge sheets for the whole cycle, take a good look at the trends. Chart the claims that were not layoffs. Do they tend to come from one department? From certain supervisors? At certain times? From the same circumstances? How long have the people been on board before separation?
3) Turnover Review : How many people do you have on board? How many W-2s will you issue? The difference between those two numbers is your turnover. Take the turnover times your state's taxable wage base times your UC rate. That is all tax wasted to cover people who are no longer in your employ. Because in an ideal world, where people came to work for you, succeeded, and stayed, you would not pay tax on any of those turnover W-2s. Is all your turnover seasonal? Could any of it be better controlled by more sensible personnel procedures, or better educated managers? I recently consulted with a company which has about 200 employees, yet pumps out over 900 W-2s. Regardless of their rate, this company is paying the taxes of an outfit four times their size. Rate does not equal expense. Rate times wages equals expense.
Don't fix problems. Fix it so that you don't have them.