Florida employers will soon be asked to pay more — a lot more — to cover the cost of unemployment compensation, adding yet another thorn in the side of businesses struggling to recover from the worst economic downturn in decades.
For employers now paying the lowest rate, the tax will jump from $8.40 per employee to $100.30, the state Revenue Department said Wednesday.
“That sounds like a thousand percent increase,” said Kevin Rusk, owner of the Titanic Brewery and Restaurant in Coral Gables, after hearing the news. “That’s absurd.”
For his company, the increase works out to around $2,700 total for his 30 employees.
“All this does is eat away at profits,” he said. “I can’t just raise prices based on this. Unfortunately, there’s nothing you can do other than eat it. That’s the most frustrating part of it.”
The problem comes down to this: 667,000 of the state’s one million unemployed residents are now receiving benefits, and the state needs to come up with more money. The most any one employee can receive is $300 per week, but that stacks up when multiplied by almost 700,000.
This time last year, the state had $1.3 billion saved in a “trust fund’’ to cover unemployment benefits. But with the unemployment rate up to 11 percent, the fund is now empty. Since August, the state has been borrowing from the federal government to continue paying benefits. The current rate of borrowing is $300 million a month.
Under state law, the deficit will trigger an automatic tax increase for next year. Employers with a history of extensive firings will continue to pay an even higher rate, with the maximum tax going from $378 to $459 per employee.
Those figures include the effects of a law passed last year increasing the amount on which the tax is based from the first $7,000 of an employee’s pay to the first $8,500. The figures do not include an additional unemployment tax charged by the federal government.
But employers aren’t happy about the increase and say it’s just another burden that will affect their ability to add more workers and spur economic growth.
“When you’re getting attacked as a small business by all these various agencies adding their portion to everything collectively, it adds up and starts to impact your decision in hiring people,” said Mary Frandsen, president of OTB Architectural Elements in Hollywood. The firm makes architectural accents from resin.
As an example, she said, new rules under the federal stimulus program require business owners to pay a portion of former workers’ health insurance fees under COBRA. OTB used to offer health insurance within a month of employment, now it can no longer afford to do that.
“I don’t want to get stuck paying COBRA on someone who didn’t work out for us,” said Frandsen, who has four employees.
Restaurateur Rodrigo Martinez said he can see the need for unemployment compensation, but adds, “It’s difficult for me to accept that there’s no other entity that can absorb this but me and all the other business owners.”
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