Published: Tuesday, Nov. 24, 2009

Updated: Tuesday, Nov. 24, 2009

Unemployment tax adds pressure: Looming increase worries many local small businesses

BRADENTON — Small businesses in Manatee County are bracing for another financial strain that lies ahead.

As a result of statewide unemployment conditions, businesses will see an increase in unemployment compensation taxes starting in January. The growing jobless rate depleted the state’s trust fund for unemployment benefits in August, prompting the Department of Revenue to issue a tax rate increase.

“It’s unfortunate because we’ve been trying to minimize our turnover over the years so that we pay a lower (tax) rate,” said Randy Clark, owner of Georgia Carpet World in Bradenton. “It’s going to be difficult to pass along that cost in this economy where we’re trying to hold prices down.”

The unemployment tax rate is based on a business’ employee retention rate: the lower an employer’s turnover rate, the less they pay in annual unemployment compensation.

But even the minimum annual rate for employers will skyrocket next year, increasing from $8.40 an employee to $100.30 an employee.

The maximum annual rate for employers will increase from $378 an employee to $459 an employee. The increases are reflective of the state increasing an employee’s taxable wages from $7,000 to $8,500.

Florida’s unemployment compensation trust fund had a balance of more than $1.3 billion at the end of the fourth quarter of 2008.

The surging unemployment rate, however, crippled the fund to a balance of about $450 million as of June 2009. And, by Aug. 24, the trust fund ran dry and Florida began borrowing from the federal government to pay unemployment benefits. Florida borrows about $300 million a month from the federal government.

“We’re paying for basically everybody else’s layoffs,” said Clark, who has 15 employees. “It will definitely impact future hiring, it will make me think twice for sure about hiring.”

Mike Osmond, owner of SweetBerries Frozen Custard, said local businesses such as his Bradenton and Sarasota eateries will also have to consider raising prices due to the tax increase.

“I think what it impacts more than anything is the price of product as we sell it,” said Osmond, who has about 40 employees. “It‘s just one more cost I have to factor in. Last year, I didn’t raise prices because of the economy and I felt like I’d lose a lot of customers, but with this new tax, we’re going to have to raise prices.”

George Bushong, chairman of Administrative Concepts Corp., a Bradenton professional employer organization, fears the tax increase will further prolong the state’s recovery.

“It’s a double-edge sword,” Bushong said. “There’s so many people without jobs they’re overwhelming the state unemployment system. With the tax increase it will make it harder for some employers to stay in business, which means it will create more unemployment.”

In response to the economy, Administrative Concepts implemented a re-employment program a year ago in which the PEO tries to place employees who were laid off by one of its clients in a similar position with another client.

However, Bushong said for every 100 letters that Administrative Concepts sends to qualified displaced employees for re-employment assistance the PEO has only received responses from about 6 to 15 percent.

“The unemployment insurance division agrees that the other 85 percent are considered job refusals and therefore not eligible for unemployment benefits, however we are unable to get the benefits denied,” Bushong said.

Kathy Burnett, owner of Signs 2 Go, said she can’t afford to raise prices at her Bradenton and Sarasota stores to make up the cost. Burnett currently pays about $1,900 a month in unemployment taxes for her four employees.

“It just means we’re going to make less and it’s going to take longer to pay off our debts,” Burnett said.