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.