As staffs have shrunk these past four years, hiring decisions have become more important for small employers, and for more reasons than one. Certainly, the success of a business depends on the strength of its team — but it can also depend on the team’s longevity. For small businesses especially, the unemployment taxes resulting from just one layoff can be crippling. 

Employers are taxed on both a federal and a state level, and while they can’t control the federal amount, they can work to minimize state charges. Most states calculate a business’s tax rate based on a number of factors, including payroll size, the amount the company has paid into the system, and the amount of unemployment benefits past employees have received.

That last part can have a huge impact on a small firm’s financials. A company that lays off one employee can end up paying several thousand dollars more in taxes each year following the layoff.

How can employers protect against this scenario? Make smart hiring decisions, always treat employees according to the employee manual, and document any incidents that occur, says David Blaine, a Bakersfield, Calif.-based employment lawyer. 

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