Why Does SUI Withholding Matter for Your Business?

If your small business is not familiar with the acronym “SUI” yet, then it’s time to get acquainted with this requirement for virtually any company planning to hire employees. Let’s take a closer look at defining the term and what it means for both entrepreneurs and the employees they hire to be on their team.

SUI: What does it mean?

SUI stands for “state unemployment insurance,” which is an employer-funded tax program designed to protect workers that become suddenly involuntarily unemployed. Typically, the reasons for becoming involuntarily unemployed are of no fault of the worker. These reasons may include being laid off, being fired for reasons other than misconduct, or being let go due to health concerns or personal problems. While these workers look for new jobs, state unemployment systems provide short-term benefits through unemployment compensation.

Does my business need SUI?

Typically, the answer is yes particularly if you have already hired employees or are planning to hire team members. Once more than $300 in wages has been paid to an employee, employers are responsible for paying their state’s unemployment insurance and are required to pay unemployment taxes on the employee’s wages in the state.

What if I didn’t pay any employees this quarter?

Even if you didn’t pay any employees this quarter, your tax reports or tax and wage reports are due on a quarterly basis. Liable employers still must submit these reports every quarter, whether employees were paid or not.

Is there a possibility my tax rate could increase?

There are a few situations where tax rates may increase for employers. Small businesses that hire employees and fire or lay them off frequently will have unemployment claims filed with the business. The more claims are associated with the company, the more their tax rate increases. These rates do vary from state to state, however.

It’s equally important for employers to remember that unemployment insurance is only paid up to a state maximum wage. Any excess wages beyond that mark do not need to be paid, but must still be reported on tax reports or tax and wage reports. Additionally, insurance rates tend to fluctuate too, so I recommend calculating these rates with the help of the state to make sure you’re on the right track.

Can I bring SUI unemployment administration in-house?

You can, but keep in mind that it’s a big responsibility to maintain your own. Failure to maintain current paperwork or respond to claims in a timely manner could lead to expensive penalties for your small business.

You may find it’s easier to outsource unemployment duties to a third party. Professionals who are well-versed in state unemployment insurance will be able to take the time to maintain unemployment and help your business to stay in compliance.

Have any questions about this post? Let us know in the comments!