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Saturday, January 8, 2011

Michigan businesses hit with fees for unemployment insurance, as Federal jobless rate decreases to 9.4 percent

SAN FRANCISCO - JANUARY 22:  A job posting is ...Image by Getty Images 
As the Federal unemployment rate
drops to 9.4 percent, Michigan
businesses are hit with new fees
to back pay borrowed jobless
insurance payments, in the state. 

Michigan businesses in 2011 will be have to pay new fee to assist the state pay back the $3.7 billion borrowed from the federal government to pay unemployment benefits, reports the Jackson Citizen Patriot.

Federal law requires that all businesses increase how much they pay to the IRS for unemployment this year, from $21 to $42 per employee. That payment is due at the end of January 2011 and will be charged each month thereafter.
“It’s a horrible time as you’re trying to grow your business,” said Stephen Geskey, director of Michigan’s Unemployment Insurance Agency. “This hits employers at the worst possible moment.”
On Friday January 7th, the Bureau of Labor Statistics reported the national unemployment rate dropped by .4 percent from 9.8 to 9.4 percent; with the economy adding 103,000 jobs in December 2010.

But for Michigan businesses and job seekers, the news of the Federal Unemployment Rate drop does not come as good news, as the state owes another $3.7 Billion dollars borrowed to pay its’ jobless supplemental income insurance program.  

With this, businesses in the state face an additional “solvency tax.” 

On top of the $42 per employee, any business whose laid-off workers have used more jobless benefits than the company paid into the system will have to pay an additional $67.50 per worker.

The increased costs that will be paid to the Federal Government by business likely will discourage businesses from hiring when new hiring is needed most and could not come at a worst time; while the 12.4 percent state unemployment rate has dropped from a high of 14.2 percent in January 2010.
“Now you’re taxing hiring. Why on earth would you want to do that?” stated Bill Rayl, executive director of the Jackson Area Manufacturers Association stated to the Jackson Citizen Patriot. “We don’t want to disincentives (hiring for) jobs right now”, he cited.
The $3.7 billion borrowed what the federal government has loaned the state to make sure it can pay jobless workers their initial 26 weeks of benefits. Federal extensions of unemployment assistance allowing up to 99 weeks of jobless supplemental insurance payments in the state, are separate.

Former Governor Jennifer Granholm (D) and current Michigan Governor Rick Snyder (R) support a continuation of a waiver in the 2008 stimulus bill which spared businesses from paying the solvency tax. For Michigan business not to pay the extra fee at the end of this January and beyond, Congress would need to act to extend the waiver.

Geskey said that all businesses that owe the $42 per employee can apply for a state tax credit to help ease the sting of the increased costs.

For more information about unemployment taxes, business owners can go to and subscribe to the “Employer Adviser.” 

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