Do you know what SUI stands for? This is an acronym for state unemployment insurance. Established small businesses are likely familiar with the term. However, entrepreneurs new to doing business may not fully understand what it means. What is state unemployment insurance and why does it benefit small businesses to obtain SUI?
What Is State Unemployment Insurance?
Before you understand how SUI benefits businesses, it’s important to understand what this program was established to do. According to the U.S. Department of Labor, the Federal-State Unemployment Insurance program was established for eligible workers. If these workers become unemployed through no fault of their own and are able to meet eligibility requirements, they receive unemployment benefits courtesy of this program.
Payments eligible workers receive are meant to provide temporary financial assistance as workers search and apply for new jobs. Unemployment benefits are determined by state law. The amount of benefits provided and length of time eligible workers may receive them also varies from state to state.
The Employer’s Role In State Unemployment Insurance Programs
Now that we know what an eligible employee receives, what role does the employer play in its program? SUI is an employer-funded tax. The benefits eligible workers receive are from employers that paid unemployment taxes on the wages of their employees in that state. Each quarter, employers must submit a tax report to the state.
What happens if you didn’t have paid employees during a specific quarter? The employer must still submit their tax report or a tax and wage report.
Why Do Small Businesses Need SUI?
Here’s what obtaining your state unemployment insurance number can do for your business.
SUI Allows Businesses To Hire Employees
Are you a profitable business that plans to hire and pay employees? Have you already hired and paid employees? Did you pay an employee more than $300 in wages? If you answered yes to any of these questions, you must file for state unemployment insurance.
It’s a little like obtaining an EIN, which the IRS requires businesses to do before they hire employees. By obtaining your statement unemployment insurance number, your business is required to pay unemployment taxes on the wages of new hires in its given state.
How Much Do I Pay?
Employers will not pay the exact, same amount in SUI withholding each year. Most states follow a similar format for calculating the rate for unemployment insurance. Generally, a base rate is set for the year. Then, an experience model is put into place. The model reviews how many of an employer’s former employees used their unemployment insurance over a given timeframe. The more claims are filed, the more states may tax heavier or lighter rates based on that model. Remember to calculate your SUI rate each year, since maximum taxable wages and rates are subject to change yearly.
SUI helps benefit employees as much as it does businesses, which we’ll talk more about in a moment.
State Unemployment Insurance Benefits Employees
What does it mean when a worker becomes unemployed through no fault of their own? It’s possible that they experienced one of the following scenarios.
- Leaving a position due to health issues or problems of a personal nature.
- Termination for reasons other than misconduct.
SUI programs are able to provide these workers with financial benefits. As the worker applies and interviews for new jobs, state unemployment insurance ensures that they receive unemployment compensation.
Third Party Companies Assist Businesses With SUI Witholding Services
It can be a struggle to keep up with state unemployment insurance paperwork. Small business owners may find they are unable to keep up with tax report deadlines or respond back to claims. If you find this is the case for you and your business, consider working with a third party service for your state unemployment insurance.
Companies like MyCorporation are here to help with all your unemployment administration needs. Our team of trusted professionals works with nationally recognized payroll providers. Not only do we help you obtain your SUI numbers from the state, but we assist with maintaining paperwork and claims. This keeps expensive penalties at bay, avoid administrative hassles, and stay in compliance with the state. Best of all, when we take care of your SUI needs entrepreneurs can get back to spending more time and energy focusing on their business!