Thursday, November 24, 2016

The REAL Cost of Your Employee

How much does it cost to hire an employee? Take a look at the chart below.
An employee's cost to the company is more than just the wage or salary you offer them. You are required to pay taxes on the wages your employee earns. Some of these taxes are split between the employer and the employee, while others are the sole responsibility of the employer. The rates vary based on the employee’s earnings. You can chalk it up to the cost of doing business, but it’s important to understand what your true cost will be before making that next key hire.
Your true cost to hire is a sum of the employee wage plus employer taxes. Of course there are additional expenses that are optional for businesses, like health and dental benefits, equipment, and office space, but for now let’s just focus on the payroll costs.
In California the payroll tax rates for employers break down like this:
  • Social Security: Social Security is a federal insurance program that provides benefits to retired employees and the disabled. Employers must pay 6.2% of taxable wages on the first $113,700.
  • Medicare: Medicare is a federal system of health insurance for people over 65 and certain younger people with disabilities. Employers must pay 1.45% of taxable wages on the first $200,000, then 2.35% of taxable wages beyond that.
  • California Unemployment: A state-sponsored insurance program, California provides benefits to unemployed workers, the disabled, and those on paid family leave. The employer tax rate varies from 1.5% to 6.2% of taxable wages on the first $7,000 depending on the rate given to you by the Employment Development Department (EDD). The standard new employer rate is 3.4%.
  • Federal Unemployment: The Department of Labor oversees state unemployment programs that provide benefits to workers who become unemployed due to no fault of their own, and meet certain other eligibility requirements. The employer rate of 1.2% of taxable wages on the first $7,000 per employee is dependent on your timely filing of all state unemployment taxes and includes a credit reduction for California.
  • Employment Training Tax: The ETT provides funds to train employees in targeted industries to improve the competitiveness of California businesses. Employers must pay an extra 0.1% of taxable wages on the first $7,000.

Sunday, November 13, 2016

Business Growth Projections for 2017

Get ready for growth in 2017!
Several sources, including the U.S. Chamber of Commerce and the Kaufman Foundation, have published reports on how well small and medium businesses have performed in recent years. The disappointing news is that business policies, regulations, high corporate taxes, and skyrocketing health care premiums during the last eight years, have caused many would-be small business owners to either throw in the towel, or postpone business growth altogether. According to the Wall Street Journal's Ben Leubsdorf, before the U.S. Presidential election, forecasters agreed the U.S. was set for only moderate economic growth.
Running on a pro-American business platform, Donald J. Trump persuaded voters around the country to support his agenda resulting in a major election night upset and his victory. Susan Solovic, said in her post-election blog, The Small Business Expert, that she views the President-elect as someone who can remove many of the barriers that small businesses face. "I’m counting on you to create a vibrant economy which gives all Americans an equal opportunity to work hard and build success," she wrote in her articles congratulating Trump. Similar sentiments have entrepreneurs and investors alike expecting a surge of startup businesses in 2017 in large part due to the promises of lower taxes and post-election pro-business policies. We hope they're right.
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