Employee Leasing Companies Passing Tax Burden to Client’s

AADVISORY:   UNEMPLOYMENT INSURANCE PROGRAM LETTER NO. 34-02

 

TO:   ALL STATES WORKFORCE AGENCIES

 

FROM :      GRACE A. KILBANE

Administrator

Office of Workforce Security

 

SUBJECT:   Tax Rate Manipulation – State Unemployment Tax (SUTA) Dumping

 

  1. 1.       “SUTA Dumping” is a term used by the “employee leasing” industry known as PEOs, to avoid high unemployment insurance (UI) tax rates. One type of SUTA Dumping is discussed below:

 

  1. a.      Affiliated Companies. A leasing company forms a number of additional corporations and obtains an Unemployment ID # for each company. They report wages for a small number of individuals and pay the state UI taxes on each company until it earns the minimum tax rate. Then the majority of the employees are moved to a corporation with a minimum tax rate allowing it to effectively “dump” the higher tax rate earned by the original company and maintain a low UI tax rate.

 

 

Fl. law HR 443-131 F.S.  has now stopped PEOs from SUTA Dumping.  The result is leasing  companies are now raising Unemployment Tax fees to their clients to pass on $100,000,000 of new Unemployment Taxes they are now having to pay.

 

Posted in Payroll & HR Alerts.

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