Monthly Archives

August 2018

Pennsylvania Unemployment Tax Rates Hold Steady for 2019

In a phone call today, sources from the Pennsylvania Department of Labor & Industry indicated that unemployment tax rates for 2019 will remain “generally unchanged.”

Effective for 2019, unchanged from 2018, total tax rates for experience-rated employers will range from 2.3905% to 11.0333% and will include a 5.40% solvency surcharge adjustment, a 0.50% additional contributions tax, and a 1.10% interest tax rate.

Additionally, the total tax rate for new non-construction employers is to be 3.6890% and the total tax rate for new construction employers is to be 10.2238%. The tax rates for new employers are to include a 5.40% solvency surcharge adjustment.

Pennsylvania employees are to be assessed an unemployment insurance tax rate of 0.06%, unchanged from 2018, with the tax deducted from wages earned.

Pennsylvania’s unemployment taxable wage base, which is to be $10,000 for 2019, does not apply with regard to unemployment tax assessed on employees.

As always, if there are any questions please do not hesitate to contact us.

Payroll Tax Savings Opportunities

After the Great Recession of 2008, many corporations have consistently gone through Merger & Acquisition (“M&A”) activity. The Institute for Mergers, Acquisitions and Alliances (“imaa”) recently released a study reflecting a significant increase in this type of activity and below is a graph reflecting their findings:

There are various business reasons why corporations acquire or merge with other entities. Acquiring or merging with companies is generally to grow the business, acquire companies in the same industry, or even merge with companies that would fit their business model.

However, many companies that go through M&A don’t realize the opportunities out there from a payroll tax perspective. Usually the Payroll Department is last to find out about bringing on employees that were acquired to a newly established EIN or transferred to one of their subsidiaries or parent company.

Payroll is scrambling to report these employees under one of the company’s EIN or a newly established entity timely, but payroll can’t do anything until an EIN is created with the IRS, registration with the Secretary of State, applying for state unemployment and withholding account numbers, payroll systems in place, etc…

Due to the time or system constraints, many employers don’t consider payroll compliance requirements (i.e. reporting M&A activity with the state agencies) and SUI, FUTA and FICA wage base continuance. By using the wages paid by the selling employer to determine when the acquired employees attain the annual taxable wage bases (for FICA, FUTA, and SUI), the acquiring employer can realize meaningful savings if the transferred employees restarted these payroll taxes.

This is where Thomas & Company can assist. We ensure that proper management of historical and current M&A compliance obligations are met with the state agencies and that all potential tax saving opportunities are considered at the state and federal level.

We offer the following services for our current and prospective clients:

Comprehensive Unemployment Tax Review

After reviewing and documenting all state unemployment accounts, we will research account history with state agencies and provide an executive summary of findings to the client. We will make sure unemployment accounts are in good standing and identify outstanding balances, delinquencies and overpayments. In the states where it is permissible, Thomas & Company will submit applications to have overpayments refunded to you and we will advise you of tax strategies available to ensure all future payments are accurate.

Merger & Acquisition Compliance Services

When an asset purchase, merger, internal reorganization or acquisition of a part of a predecessor’s business unit occurs, employers are required by state unemployment agencies to disclose information relating to the transaction. Reporting requirements are complex and vary by state. Any undisclosed and erroneous reporting can result in penalty tax rates, tax rate increases, penalties and/or interest charges or missed savings opportunities. Clients who retain Thomas & Company as their Unemployment Cost Management provider receive this service at no additional cost, while non-client engagements are performed on a project basis.

Tax Saving and Refund Opportunities

When a mid-year transaction occurs, employers may be eligible to consider the year-to-date SUI wages paid by the predecessor. Thomas & Company works directly with the state agency to ensure the tax rate transfers are processed and can prepare amended quarterly SUI returns. We can also amend Form 940 (Employer’s Annual Federal Unemployment (FUTA) Tax Return) and Form 941 (Employer’s Quarterly Federal (FICA) Tax Return) if the transaction qualifies as a Predecessor/Successor Relationship under state and IRS rules. Thomas & Company will continue to track all SUI, FUTA and FICA credits until refunds are secured, and ensure clients follow all statutory requirements of the state agencies and IRS.

If you have historical or upcoming transactions and would like a review of your unemployment tax options and tax recovery opportunities, please contact Josh Kendall at (615) 620-1821 or via e-mail.

As always, if there are any questions please do not hesitate to contact us.

Unemployment Weekly Claims Report for the W/E August 18, 2018

The Unemployment Insurance Weekly Claims report for the week ending August 18, 2018 has been released by the Department of Labor.

  • Seasonally adjusted initial claims: 210,000
  • 4 week moving average: 213,750
  • Seasonally adjusted insured unemployment rate: 1.2%
  • Seasonally adjusted insured unemployment number: 1,727,000
  • 4-week moving average: 1,735,500
  • Number of unadjusted claims: 172,932
  • Unadjusted insured unemployment rate: 1.2%
  • Unadjusted number claiming UI benefits: 1,668,335

The full news release report can be downloaded here.

North Carolina Announces UI Modernization

On September 28, 2018, the North Carolina Department of Commerce, Division of Employment Security (DES) will change how you interact with the agency.  In order to provide better service, they are modernizing their unemployment insurance benefits system and how unemployment claims are handled within the Division.

This transition to a new electronic system will eliminate the use of paper including unemployment claims, benefit charge statements, benefit wage audits, appeals, etc.

The origin of this change comes from a tri-state alliance between Georgia, North Carolina, and South Carolina named the Southeast Consortium for Unemployment Benefits Integration (“SCUBI”). The propose of this alliance is to modernize the Southeast’s unemployment insurance system.

According to our contacts with the Division, NC will migrate existing employers over to the new system on September 28, 2018 and established POAs on file with the agency will not be affected.

Note: Tax filings will continue as normal and will not be impacted by SCUBI.

Thomas & Company clients do NOT need to apply for a SCUBI account.  If you do so, it could impact T&C’s ability to serve your account.  T&C as your third-party representative for UI matters will take care of this step on your behalf.

In the coming weeks, the Division will be releasing a video on SCUBI via YouTube and we will pass on a link to this video to our North Carolina clients. The Division will also have representatives available to answer questions at des.scubi@nccommerce.com.

As always, if there are any questions please do not hesitate to contact us.

Unemployment Weekly Claims Report For the W/E August 11, 2018

The Unemployment Insurance Weekly Claims report for the week ending August 11, 2018 has been released by the Department of Labor.

  • Seasonally adjusted initial claims: 212,000
  • 4 week moving average: 215,500
  • Seasonally adjusted insured unemployment rate: 1.2%
  • Seasonally adjusted insured unemployment number: 1,721,000
  • 4-week moving average: 1,738,500
  • Number of unadjusted claims: 179,870
  • Unadjusted insured unemployment rate: 1.2%
  • Unadjusted number claiming UI benefits: 1,756,213

The full news release report can be downloaded here.

The Changing Landscape of Employment Security

We recently came across an interesting article discussing the changes within  the employment‐based security system in America. The technological advancements that have swept this nation since the industrial revolution have had a multi‐faceted impact on several job markets, particularly in the Rust Belt.

One could say that Midwestern workers really own the history of the employment‐ based safety net they worked hard to enforce during the booming years of labor‐ intensive manufacturing in their part of the country. The employer‐based systems served them well. With the passing of time and the evolution of employment, systems in place such as health insurance, pensions, and unemployment insurance have become less and less beneficial for this Rust Belt community.

We can thank these unions and hardworking manufacturing industries for setting the standards of the country’s economic security many moons ago. Pensions and health insurance systems used today were first introduced in the area during the second World War to entice employees, due to limited wage compensation imposed during that time. Wisconsin paved the way in the public sector with Social Security participation. However, the policies that made sense in that era now crave flexibility for survival in today’s changing world of employment.

Novel concepts of private pension plans implemented in the Midwest spread nation‐ wide over the next couple of decades. By 1964 an impressive 80 percent of all American workers were a part of employer‐provided health insurance.

Times have changed. The need for human hands in production began its decline with the introduction of robots in production. The most extreme case of this change was noted in Detroit and its 5 surrounding states. A staggering 35 percent drop in manufacturing employment (1.6 million jobs) has been observed within the first decade of the year 2000.

As a result of these changes, the extreme plunge of companies offering pension plans have affected a devastating number of American workers. About half of fortune 500 companies in the states offering pension plan benefits dropped down to a mere 5 percent by the year 2015. By 2010, 37 million Americans were without health insurance. The disappearing act of employer‐provided safety nets quickly became more visible.

The year 2016 brought on more challenges for those finding themselves pushed out of their jobs, with less access to unemployment insurance. The lack of local and state funding had reached $1.4 trillion. Unemployed workers receiving benefits during this time were far and few between. Qualified unemployed workers receiving UI benefits dropped to a record low of 27 percent.

The shift dislocating this large group of manufacturing workers is a struggle as many originally entered the booming workforce without any need for further education. A modern need to search out new careers without higher degrees is a challenging position to be in.

The increasing rates of automation and digitalization across the country, specifically in this area we speak of has resulted in an increase from long‐term single employer jobs to more contingent situations. Earning money as a part‐time worker, freelancer, temp firm employee, and the self‐employed is becoming a new norm and therefore calls for some adjustments. Not only an issue in the Midwest, this rising crop of employees now accounts for 40 percent of the national workforce. Problematically, lack of special diplomas or back‐ups skills make the “gig economy” a less secure one for the Rust Belt contingent.

So, considerable arguments could be made about necessary reform to the current economic security system as it has adapted over the recent years away from a purely long‐term single‐employer workforce. Solutions could be created that can simultaneously support innovational advancements while protecting the economic security of American workers this affects negatively. Extending benefits for those employed in multiple job situations as well as providing support during a time of adapting and advancing in this new economy, during temporary dislocations, helping workers gain more access to better paying jobs with newly acquired skills.

Policymakers are hard at work to solve this for those affected. Portability, Pro‐ rationing of benefits, unemployment insurance, and more aggressive adjustment assistance reform are all on the table as vehicles of progress for a renewed safety net for this portion of American workers.

Finding positive ways to create more flexibility in accommodating the changing base of American workers, particularly in the hardest hit Rust Belt communities, is one that we hope will inspire optimism in these United States. Everyone should have resources they need to achieve the American dream, especially those in the Midwestern states that originally provided the groundwork for security systems that lasted and benefited so many for so long. How the economy will evolve as a result of the newer generations’ ever‐changing working scenarios will be interesting to observe.

MAINE: An Update on LD 700

Legislative Document 700, “An Act to Give Flexibility to Employees and Employers for Temporary Layoffs”, was intended to assist Maine employers by keeping their trained employees available (not requiring them to look for new jobs) while on a temporary layoff. We discussed in a bulletin earlier this month, Governor LePage’s veto of the bill. We have now learned that the legislature has overruled the governor’s veto.

Governor Paul LePage has responded with a letter to the employers of Maine, urging them to get involved to repeal this “outrageous” law. LePage begins the letter with a warning of a probable rise in unemployment taxes should L.D. 700 be signed into law. He goes on to say that legislation such as this turns the basic intent of unemployment insurance from a safety net to an entitlement, incentivizing being jobless to collect wages. The viewpoint of the governor is that the bill lowers competition and is the wrong solution for the state’s economy as well as the workforce. He also comments on the risk factor of certain laid off workers not getting re-hired, due to contracts falling through, etc, resulting in workers having collected benefits without looking for a job, left unprepared. LePage’s disdain for the bill also includes a portion of the legislation, which limits work searches to a 35 mile radius. LePage expresses this as an additional threat for a thriving workforce, stating the rural nature of the state lends itself to common lengthy commutes. Unemployment insurance is a means to keep workers connected in the labor market, which Governor LePage claims LD 700 relaxes the rules on, putting the state at a disadvantage.

We will continue to follow the story to learn the outcome of the proposed legislation and how it affects unemployment insurance and the overall economy of the state.

New Jersey Unemployment & Temporary Disability Taxable Wage Bases to Increase in 2019

Effective Jan. 1, 2019, New Jersey’s unemployment taxable wage base will increase to $34,400, up from $33,700 for 2018.

New Jersey’s temporary disability insurance wage base is also set to increase to $34,400 for 2019. In addition to being used for computing temporary disability insurance tax, New Jersey’s temporary disability insurance wage base is used to compute the family-leave insurance tax for employees.

As always, if there are any questions please do not hesitate to contact us.

Uber Drivers are Deemed Employees for Unemployment Purposes

The New York State Unemployment Insurance Appeals Board has ruled that three New York Taxi Workers Alliance (NYTWA) members and former Uber drivers, as well as those who are similarly situated, are employees of the company for the purposes of unemployment insurance. This decision came after the Appeals Board rejected Uber Technologies’ last-minute bid to withdraw its appeal.

“The credible evidence establishes that Uber exercises sufficient supervision, direction or control over the three claimants and other similarly situated Drivers,” wrote Appeal Board Member Randall T. Douglas in a July 12 decision. Among other things, the Board found that the rideshare company exercises control through its in-person assistance at its hubs where drivers are screened, are required to view the orientation onboarding video of essential information and are required to take Uber’s roadmap test. Uber also gives drivers its handbook and signage and refers them to specific dealerships to lease Taxi and Limousine Commission-licensed vehicles.

The decision may or may not lead to additional impending liability as an employer for other legal purposes.

Exerting Control Over Drivers

Among other things, the Board found that Uber also exercises control through its Driver App, which:

  • provides the information that appears on the Driver App
  • sets the fares charged to riders
  • establishes the rate of pay to drivers and the occasional income guarantee
  • offers various incentives and promotions
  • launches the music, tipping, and deactivation policies.

The ridesharing company assigns the work by dispatching trip requests to the closest individual driver who must accept the dispatch within a 15-second mandate. The company also provides the requisite tools, such as built-in maps on the Driver App and Uber signage.

Uber also exercises control by providing in-person support to drivers and monitoring their performance. In doing so, Uber solely determines when and how long to deactivate a driver for failing to meet the company’s performance standards. The company also fields complaints and regularly communicates feedback to drivers, including the minimum threshold star rating necessary to avoid suspension, and communicates the trip’s most efficient route and the drivers’ acceleration, braking, and overall speed. Uber occasionally reimburses drivers for certain expenses. Further, the company handles all the bookkeeping needs, including collecting from riders, adjusting for mandatory pay deductions, and paying drivers directly.

Not Just A Technology Platform

While Uber contends that it is simply a technology platform that connects riders to drivers, the Board found that its business is similar in many respects to other more traditional car service companies. Uber’s technology merely replaces much of the duties that an employee-dispatcher would perform to dispatch a trip request solely to the nearest driver who may accept the dispatched assignment. The record also demonstrates that Uber markets its transportation services to drivers and riders alike, selects only qualified drivers, monitors and supervises their performance, rewards high-performing drivers, disciplines drivers who fail to meet company standards on a temporary or permanent basis, sets the fare prices that riders are charged, and sets the driver’s fee paid to Uber.

5-Star Rating System

The Board found it significant that Uber requires each rider to rate their driver under its 5-star rating and provide written feedback on the driver’s performance, which is then used to monitor and discipline drivers. “Effectively, Uber utilizes Riders’ ratings and feedback as one of various tools with which to gauge and otherwise monitor Drivers’ performance including cleanliness, professional attire, and driving manner,” wrote the Board. “The direct consequences and implications of the mandated 5-star rating and feedback demonstrate control.”

Meeting Regulatory Mandates

The Board also pointed out that the record contained ample evidence showing that Uber, once the drivers are logged in for duty, exercises or reserves the right to exercise sufficient control beyond regulatory mandates, including its 5-star rating system and list of acceptable cars. The record demonstrates that the claimants and other similarly situated drivers were covered employees for purposes of unemployment insurance, the Board ruled.

“This decision falls in line with nearly thirty years of Unemployment Appeal Board and court precedent finding drivers to be employees in similar circumstances,” said Zubin Soleimany, NYTWA Staff Attorney. “While Uber has long argued that is merely a technology company that did not control its drivers, Uber’s use of technology actually created a more pervasive system of supervision and control than had ever been used by other car services that the Appeal Board and the courts found to be employers for decades. Through its own programming, Uber solicits supervisory feedback on every trip a driver takes, monitors driver behavior, reviews drivers’ routing choices, docks their pay for taking inefficient routes, and even tracks and evaluates the relative smoothness at which drivers brake and accelerate. App-based employers should not be able to insulate themselves from responsibilities as employers by hiding behind a smokescreen of technology.”

The case, Uber Technologies, Inc., is Appeal Board No. 596722.

As always, if there are any questions please do not hesitate to contact us.

Unemployment Weekly Claims Report for the W/E August 4, 2018

The Unemployment Insurance Weekly Claims report for the week ending August 4, 2018 has been released by the Department of Labor.

  • Seasonally adjusted initial claims: 213,000
  • 4 week moving average: 214,250
  • Seasonally adjusted insured unemployment rate: 1.2%
  • Seasonally adjusted insured unemployment number: 1,755,000
  • 4-week moving average: 1,745,250
  • Number of unadjusted claims: 184,666
  • Unadjusted insured unemployment rate: 1.2%
  • Unadjusted number claiming UI benefits: 1,724,954

The full news release report can be downloaded here.