HONOLULU, HAWAII (December 11, 2020) – ProService Hawaii is sounding the alarm on what could be a devastating effect for Hawaii’s businesses if the State Unemployment Tax Act (SUTA) rate increases due to the depletion of the state Trust Fund that endows unemployment benefits for people who are laid off or furloughed. Hawaii employers are 100% liable for the cost of unemployment insurance through withholding a payroll tax. Due to the COVID-19 pandemic, SUTA tax rates could triple per state law come January 2021.
Although the Trust Fund was healthy prior to COVID, unemployment rose to 23.8% causing the trust to quickly deplete to a $1 billion deficit. Although Hawaii took a federal loan to cover the gap, the SUTA tax will increase by law because unemployment claims still need to be paid. According to the Department of Labor, rates will increase from Schedule C in 2020 to Schedule H in 2021 (the highest tax rate). For example, an employer paying about $1,159 per year in SUTA taxes for employees making $48,000 or more could pay $2,506 per employee in 2021.
“Small businesses are going to be sorely impacted if the SUTA tax increases,” says Ben Godsey, president and CEO of ProService Hawaii. “We believe this steep tax increase cannot be placed on our business community so we’ve been working with the Governor’s administration and lawmakers to advocate for much more moderate SUTA rate increases than those mandated.”
ProService is no stranger to advocating for similar issues that affect the business community. During the Great Recession in 2010, ProService was successful at working with the State to pass HB2169, which became Act 2, lowering mandated SUTA rate increases and spreading them out, allowing businesses time to recover. Without a legislative change to the current SUTA tax, ProService predicts that employers will see a huge increase in tax liability that slows business recovery and creates disincentives to hire employees.
For more about the SUTA tax click here.
ProService is headquartered on Oahu at 6600 Kalanianaole Hwy., Ste. 200, Honolulu HI 96825. Additional offices are located in Kona, Kahului and Kapaa. Telephone: (808) 394-3100. On the web at www.proservice.com.