Quick links

• 
  Introduction
  
• 
  Why companies choose to leave their PEO/EOR providers​
  
• 
  Brief overview of the steps​
  
• 
  Step 1: Assess current situation and identify areas of dissatisfaction​
  
• 
  Step 2: Determine future HR and payroll needs
  
• 
  Step 3: Evaluate potential solutions
  
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  Step 4: Select the best solution
  
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  Step 5: Negotiate favorable terms with the new provider
  
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  Step 6: Develop a detailed transition plan
  
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  Step 7: Implement the new solution
  
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  Conclusion
  

Introduction

A Professional Employer Organization (PEO) or Employer of Record (EOR) is a third-party company that provides outsourced human resource, payroll, and benefits services to other businesses. These organizations can help smaller companies gain access to benefits, manage payroll, and handle HR compliance issues that may be difficult to navigate on their own.

Why companies choose to leave their PEO/EOR providers

While PEO/EOR providers offer many benefits to companies, some businesses may choose to leave their provider for various reasons. These reasons may include dissatisfaction with the level of service, high costs, or the need for more customized solutions.

If you’re looking to transition away from your PEO/EOR provider, it’s important to follow a set of steps to ensure a smooth and successful transition. These seven steps include assessing the current situation, determining future HR and payroll needs, evaluating potential solutions, selecting the best solution, negotiating favorable terms with the new provider, developing a detailed transition plan, and implementing the new solution.

Following these steps can help your business make a successful transition away from your current PEO/EOR provider. It can also ensure that your new solution meets your business’s specific HR and payroll needs.

Brief overview of the steps

Each step of “The Seven Steps to Leave your PEO/EOR” is important in its own right. Assessing the current situation allows you to identify areas of dissatisfaction that need improvement, while determining future HR and payroll needs ensures that your new solution is customized to your specific needs. Evaluating potential solutions helps you compare different options and select the best one for your business. Negotiating favorable terms with the new provider can help you save money and get the most out of your new solution. Developing a detailed transition plan is critical to ensure a smooth transition, while implementing the new solution can be challenging, but ultimately rewarding.

Step 1: Assess current situation and identify areas of dissatisfaction

Before transitioning away from your current PEO/EOR provider, it’s important to identify the areas of dissatisfaction that led to the decision to leave. This can help you avoid the same issues in the future and ensure that your new solution meets your specific needs.

How to assess the current situation
To assess the current situation, it’s important to review your existing contract, talk to employees and other stakeholders, and evaluate the level of service you’re receiving.

Examples of common areas of dissatisfaction
Some common areas of dissatisfaction include limited customization options, high costs, and lack of transparency.

Step 2. Determine future HR and payroll needs

It’s important to accurately identify your future HR and payroll needs to ensure that your new solution is customized to your business’s specific needs.

How to accurately identify future needs
To accurately identify future needs, it’s important to conduct a thorough analysis of your business’s HR and payroll needs, consider the needs of your employees, and factor in any future growth or changes.

Examples of common future HR and payroll needs
Common future HR and payroll needs include more robust reporting, better benefits options, and streamlined payroll processes.

Step 3: Evaluate potential solutions

Once you have identified your company’s future HR and payroll needs, the next step is to evaluate potential solutions that can meet those needs. There is a range of potential solutions available, such as cloud-based payroll management software, payroll software for small businesses, and HR platforms.

Which factors to consider while evaluating

When evaluating potential solutions, it’s essential to consider factors such as the features and functionality of the solution, its scalability, and its ability to integrate with your existing systems. Additionally, it’s crucial to consider the cost of each potential solution, both in terms of initial investment and ongoing costs.

How to evaluate?

One way to evaluate potential solutions is to create a list of must-haves, should-haves, and nice-to-haves, based on your company’s needs. This will help you prioritize features and functionality when evaluating potential solutions and ensure that you select a solution that meets your most critical needs.

Examples of common solutions

It  includes cloud-based payroll management software (like for e.g. UZIO), which allows companies to manage their payroll and HR functions in one place, and HR platforms, which provide a comprehensive solution for managing all aspects of HR, from recruiting to benefits administration.

Step 4: Select the best solution

After evaluating potential solutions, the next step is to select the best solution for your company. This involves a comprehensive evaluation process, taking into account various factors such as functionality, scalability, cost, and implementation time.

To make the best selection, it’s essential to involve key stakeholders in the decision-making process, such as HR, payroll, and finance teams. Additionally, it’s important to consider the long-term implications of your decision, such as the ability of the solution to scale as your company grows.

Examples of how to make the best selection include creating a scorecard that weighs the importance of each factor, involving a third-party consultant, and conducting demos or trials of potential solutions.

Step 5: Negotiate favorable terms with the new provider

Once you have selected the best solution, the next step is to negotiate favorable terms with the new provider. This includes negotiating the cost of the solution, as well as any additional terms and conditions, such as service level agreements, data security, and termination clauses.

Negotiation skills are essential in this step, as they can help you secure the best possible deal with the new provider. Examples of common terms to negotiate include the pricing structure, contract length, and support and maintenance services.

Step 6: Develop a detailed transition plan

The step in leaving your PEO/EOR provider is to develop a detailed transition plan. This is where the rubber meets the road, and it’s crucial to get it right. The transition plan should outline the steps that need to be taken to implement the new solution, including the timeline, resource allocation, and milestones.

A detailed transition plan can help to minimize disruption to your business operations and ensure that the transition is as smooth as possible. It can also help to identify potential risks and mitigate them before they become major issues.

To develop a comprehensive transition plan, you should work with your new provider to understand their process and requirements. You should also involve key stakeholders in the planning process, including HR, finance, and IT.

Examples of common transition plan elements include:

• Establishing a project team and assigning roles and responsibilities
• Defining the timeline and milestones for the transition
• Identifying any potential risks and developing mitigation strategies
• Establishing communication protocols and channels for all stakeholders
• Ensuring that all data is accurately transferred and integrated into the new solution
• Testing and verifying the new solution before going live
• Providing training and support to all employees who will be using the new solution

Step 7: Implement the new solution

The final step in leaving your PEO/EOR provider is to implement the new solution. This is where you put your plan into action and start to see the benefits of your hard work.

The implementation process can be challenging, and it’s essential to approach it with care and attention to detail. You should follow the transition plan that you developed in the previous step and work closely with your new provider to ensure that everything is set up correctly.

Examples of common challenges during implementation include:

• Data migration issues
• Integration challenges with other systems and software
• Employee resistance to change
• Technical glitches and bugs
• Delays in implementation due to unforeseen circumstances

It’s important to approach these challenges with a positive attitude and a problem-solving mindset. By working closely with your new provider and keeping all stakeholders informed, you can overcome these challenges and successfully implement the new solution.

Recommended Reading: Biggest pain point with Payroll and HR software

Conclusion

In conclusion, leaving your PEO/EOR provider is a major decision that requires careful consideration and planning. By following the seven steps outlined in this article, you can ensure a smooth transition and improve your HR and payroll operations.

It’s essential to follow these steps in order and to involve key stakeholders throughout the process. By doing so, you can mitigate potential risks, minimize disruption to your business operations, and improve your overall HR and payroll operations.

Leaving your PEO/EOR provider can also offer several benefits, including more control over your HR and payroll operations, cost savings, and improved flexibility. If you’re considering leaving your current provider, be sure to consult resources like UZIO’s guide on how to transition out of a PEO and bring your HR, payroll, and benefits in-house, and UZIO’s article on the tax implications of leaving your PEO mid-year.

In summary, leaving your PEO/EOR provider is a major decision, but with the right planning and execution, it can be a positive step forward for your business.

Get in touch with us for an expert-led demo to know more about UZIO payroll services.

Contact UZIO

Quick links

• 
  Introduction
  
• 
  The Importance of Human Touch Points in Payroll Customer Support
  
• 
  Potential Issues with AI-Powered Payroll Customer Support
  
• 
  Examples of AI-Powered Payroll Support Gone Wrong
  
• 
  Conclusion
  

Introduction

You found out there were critical errors in your payroll and it’s about to run. You pick up the phone but instead of reaching a person, you get stuck in the auto attendant endless loop. Sound familiar? The use of artificial intelligence (AI) is getting incorporated in many business functions. AI use in customer support has been growing and more and more tech enthusiasts want to try out new options and opportunities in this field. Before deploying this in your business, It’s important to consider the potential drawbacks of relying solely on AI-powered chatbots and other automated systems.

While AI can certainly provide any organization benefits in terms of efficiency and cost savings, it’s important to remember the importance of human touch points in certain situations. This is especially true in the context of payroll customer support, where complex questions and personalized experiences are often required.

According to a study conducted by Accenture, 83% of consumers prefer dealing with human beings over digital channels for their customer service needs. Similarly, a survey by PwC found that 59% of consumers feel companies have lost touch with the human element of customer experience. These highlight the importance of human touchpoints in customer service, and the same can be said for payroll and employee care.

Hence one of the main issues with relying solely on AI-powered solutions for payroll and employee care is the lack of human touchpoints. These touchpoints are essential for building trust and establishing a strong relationship with your employees. Without them, the employees may feel undervalued or unimportant, leading to a drop in job satisfaction and ultimately employee retention. For instance, a study by Gallup found that businesses with engaged employees have 41% lower absenteeism, 21% higher productivity, and 10% higher customer satisfaction.

The Importance of Human Touch Points in Payroll Customer Support

Payroll is a highly personal and sensitive area for employees. In many cases, employees have questions or concerns that require a human touch. For example, they may need help navigating complex tax codes, understanding their pay stubs, or resolving discrepancies in their paychecks. In these situations, a chatbots or automated system simply cannot provide the same level of support as a human customer service representative.
Businesses working with their payroll provider also run into time sensitive issues where having the ability to interact with someone can make the difference between payroll runs happening or not.

Potential Issues with AI-Powered Payroll Customer Support

There are several potential issues to consider when it comes to relying solely on AI-powered payroll customer support.

1. Compliance Considerations for AI-Based Payroll Customer Support

One of the most critical considerations when implementing an AI-based payroll customer support system is compliance. Payroll data is sensitive and subject to a range of legal and regulatory requirements. Businesses must ensure that the AI system is compliant with all relevant laws and regulations, including data protection and privacy laws.

2. AI is Not Always Accurate

AI is only as good as the data it is trained on. If the payroll system has inaccuracies or inconsistencies, then the AI customer support system will also be flawed. This can lead to incorrect or incomplete answers to employee queries, which can cause frustration and erode trust in the payroll system. If an employee receives inaccurate payroll or other employment related information without verifying with human customer support acts upon it, it can lead to financial and legal consequences for both the employee and the employer.

3. Limited Capabilities

AI-powered chatbots are still not 100% full proof, still they haven’t been tested enough in the real world. They may not be able to handle complex or nuanced questions, or they may struggle with understanding certain accents or languages. This can lead to frustration for employees and can actually increase the workload for human customer service representatives who have to step in and assist.

4. Drop in Customer Satisfaction

In addition, relying solely on AI-powered support can lead to a drop in customer satisfaction. Employees may feel that their questions are not being answered fully or that they are not receiving the personalized attention they were accustomed to. This can lead to increased turnover or a negative perception of the company overall. From a business perspective, not being able to get timely feedback and resolution to issues can have dire consequences from missed payroll and more.

5. AI Lacks Empathy

One of the biggest advantages of human customer support is the ability to empathize with customers. When employees have questions about their pay or benefits, they often have concerns or worries that are difficult to convey through automated responses. A human representative can listen and understand the employee’s concerns, and can provide personalized solutions that take into account the employee’s unique circumstances. This personalized approach is something that AI cannot yet replicate.

Furthermore, there may be situations where an employee is experiencing emotional or personal difficulties that always require a human touch. AI customer support systems may be unable to provide the empathy and support that is needed in these situations.

6. AI Can’t Handle All Situations

Even if we are able to program AI that responds to a wide range of queries, there will always be situations that fall outside of its capabilities. For example, an employee may have a highly specific question about their benefits or pay that requires a nuanced and tailored response. Each business payroll environment is different. In these situations, AI may not have the knowledge or context to provide an accurate answer.

7. The Cost of Implementing AI-Based Payroll Customer Support

Another consideration when implementing an AI-based payroll customer support system is the cost involved. Developing and implementing such a system can be expensive, especially for SMBs. Additionally, the system may require ongoing maintenance and upgrades, which can add to the overall cost. Lastly if the system frequently fails to deliver due any factor mentioned above, there will be additional cost of course correction and request backlogs that have to be essentially served by manpower. And in case enough manpower is not available that would make the situation worse!

Examples of AI-Powered Payroll Support Gone Wrong

There have been several high-profile examples of AI-powered payroll support gone wrong in recent years. 

• In one case, an AI-powered payroll system at a major retailer resulted in thousands of employees being underpaid for several months. The system was unable to handle certain nuances of the company’s pay structure, leading to significant financial hardships for affected employees.
• In another example, a large software company implemented an AI-powered chatbot for payroll support. While the system was able to handle simple inquiries, it struggled with more complex questions and often provided incorrect information. This led to a significant increase in call volume to the company’s human customer service representatives, ultimately leading to longer wait times and decreased customer satisfaction.
• In one case, an AI-powered customer support system provided incorrect information to employees about a change in payroll schedule. This caused a number of employees to miss paychecks, leading to significant financial hardship for them and damaging the company’s reputation.

Recommended Reading: Biggest pain point with Payroll and HR software

Conclusion

While AI-powered customer support systems certainly have their place, it’s important to remember the importance of human touch points in certain situations. In the context of payroll customer support, where complex questions and personalized experiences are often required, a chatbot or automated system simply cannot provide the same level of support as a human customer service representative.

So, if AI is not a complete solution, what is the right balance between AI and human touch points in payroll customer support? The answer will depend on several factors, including the complexity of the issues, the volume of inquiries, and the preferences of your customers. For example, if your organization receives a high volume of routine inquiries, such as requests for pay stubs or updates on time off balances, an AI-powered chatbot may be the most efficient option. On the other hand, if your employees frequently encounter more complex issues, such as tax withholding or benefits enrollment, a human customer service representative may be necessary to provide the guidance and expertise that AI cannot match.

By recognizing the limitations of AI-powered systems and providing a mix of human and automated support, companies can ensure that their employees receive the best possible customer service experience.

Get in touch with us for an expert-led demo to know more about UZIO payroll services.

Contact UZIO

Quick links

• 
  Introduction
  
• 
  The impact of Silicon Valley Bank’s collapse on startups and the broader economy
  
• 
  The need for structural changes in the banking industry in light of recent events
  
• 
  Key considerations while selecting a bank or a payroll provider
  
• 
  Conclusion
  

Introduction

With the recent turmoil in the financial sector, the past few weeks have certainly created a high level of anxiety for SMB business owners, especially in the tech space. Here’s some data recent points:

• A survey conducted by the Silicon Valley Leadership Group found that 32% of tech companies in the Bay Area have experienced difficulty accessing capital, with many citing the failure of Silicon Valley Bank as a contributing factor.
• In the wake of the failure, many venture capital firms have become more cautious about investing in startups. According to Pitchbook, venture capital investment in the first quarter of 2023 was down 15% compared to the same period in 2022.

And these struggles come on top of financial challenges that continue on as a result of the pandemic.

• According to a survey conducted by the National Small Business Association, 64% of small businesses say they have experienced cash flow issues in the wake of the pandemic, and 36% say they are experiencing cash flow issues right now.

What happened? This month, Silicon Valley Bank, (SVB) headquartered in Santa Clara, CA, known to primarily serve startup businesses and the technology industry suffered a swift and unexpected failure. This left many of its clients scrambling to meet payroll and pay bills. With SVB being a major lender to the tech industry, the failure has caused significant disruption in this sector. Many startups found themselves struggling to access the funds they needed to keep their operations going.

As a result, many companies have been forced to look for alternative sources of funding, such as venture capital firms, private equity firms, or other banks. However, this has not been an easy process, as many investors and lenders have become more cautious in the wake of SVB’s failure. This has made it more difficult for companies to secure the financing they need to stay afloat.

The impact of Silicon Valley Bank’s collapse on startups and the broader economy

The failure of SVB has had a significant impact on startups and the broader economy. As mentioned earlier, SVB is a key lender in the tech space, with its recent collapse leaving many companies without access to the funds they need to continue operating. This has led to layoffs, delayed projects, and in some cases, bankruptcies.

The impact has also been felt beyond the tech industry. SVB was a major player in the financial sector, and its collapse has shaken investor confidence in the banking industry as a whole. This has led to increased scrutiny of other banks, as investors and regulators seek to prevent a similar situation from happening again.

The need for structural changes in the banking industry in light of recent events

The failure of SVB has highlighted the need for structural changes in the banking industry. One issue that has been raised is the concentration of power in a small number of banks. SVB was one of the largest banks serving the tech industry. Its collapse has left many companies without a viable alternative. This has raised concerns about the need for more competition in the banking sector.

Another issue that has been raised is the need for better regulation and oversight of the banking industry. The failure of SVB has raised questions about whether regulators were doing enough to monitor the bank’s operations and ensure its stability. As a result, there have been calls for increased regulation and oversight to prevent similar situations from happening in the future.

Key considerations while selecting a bank or a payroll provider

When evaluating a bank and payroll provider, there are several key points that companies should consider to ensure that their payroll funds are secure and their employees are paid on time. Two important factors to consider are whether the bank impounds payroll funds and how direct deposit works.

Impounding payroll funds refers to a practice where a bank holds on to a portion of a company’s payroll funds for a certain period of time before releasing them to employees. This can be problematic for companies that need to meet payroll obligations on a regular basis, as it can delay payment to employees and create cash flow issues. Therefore, it is important for companies to choose a bank that does not impound payroll funds.

In terms of direct deposit, it is important to ensure that the bank and payroll provider have a reliable system in place for transferring funds directly from the company’s bank account to employees’ bank accounts. Direct deposit is the most secure and efficient way to pay employees, as it eliminates the need for paper checks and ensures that funds are transferred quickly and accurately. Companies should also ensure that their payroll provider has strong security measures in place to protect employee data and prevent fraud.

Additionally, companies should consider the bank’s reputation and track record, including their customer service and ability to handle financial crises. It is important to choose a bank and payroll provider that can provide reliable and timely support in case of any issues or concerns.

By considering these factors and choosing a bank and payroll provider that meets their needs, companies can ensure that their payroll funds are secure and their employees are paid on time and accurately.

Recommended Reading: Biggest pain point with Payroll and HR software

Conclusion

In conclusion, the collapse of Silicon Valley Bank has had a significant impact on companies, investors, and the broader economy. The situation has highlighted the need for structural changes in the banking industry, including greater competition and better regulation and oversight. As the industry grapples with these issues, it is important for companies to be proactive in seeking alternative sources of funding and ensuring their financial stability in the face of uncertainty.

Get in touch with us for an expert-led demo to know more about UZIO payroll services.

Contact UZIO

Quick links

• 
  Introduction
  
• 
  Compliance with State and Federal Laws
  
• 
  Employee Classification
  
• 
  Taxes and Accounting
  
• 
  Recruitment and Retention
  
• 
  Conclusion
  

Introduction

While many industries are encountering challenging economic conditions, the cannabis industry is projected to experience significant growth. According to the Brightfield Group, “the market is estimated to reach over $31.8 billion annual sales the end of 2023, growing to $50.7 billion in annual sales by 2028.” Many states, recognizing the potential significant revenue opportunity created by this industry is working to legalize both medical and recreational use of marijuana. Business owners in this area are well familiar with the unique challenges of running this type of business. These challenges especially happen when managing back office operations like payroll and HR. In this article, we will explore some of the key complexities that businesses in the cannabis industry face when managing payroll and HR.

1. Compliance with State and Federal Laws

One of the most significant challenges of running the back office for a cannabis business is the need to comply with both state and federal regulations. Here’s a resource that shows which state has legalized cannabis businesses and the corresponding laws.  It’s clear that the legal landscape for cannabis is constantly changing, and it can be challenging to keep up with the evolving laws and regulations. As of the date, according to congress.gov, “under the federal Controlled Substances Act (CSA), marijuana is strictly regulated and may not legally be used for medical or recreational purposes”. Therefore, cannabis is still illegal under federal law.  This also means that businesses cannot use traditional banking services, making it challenging to manage payroll.

2. Employee Classification

In a traditional business, employee classification is typically referred to one of two scenarios: an employee is classified as either exempt or non-exempt under federal and state wage and hour laws, such as the Fair Labor Standards Act (FLSA), which regulates minimum wage, overtime, recordkeeping and child employment standards at the national level. Cannabis businesses have unique needs in this area. Cannabis companies often employ workers in different capacities, including budtenders, cultivators, and dispensary managers. There is no clear-cut job classification for workers in the cannabis industry, making it challenging to determine whether they should be classified as hourly or salaried employees. This classification can impact how employees are compensated, which can lead to legal and financial repercussions if not handled correctly.

3. Taxes and Accounting

Another challenge for cannabis businesses is managing taxes and accounting. The IRS has provided a resource page to help guide Cannabis business owners. And it is advisable to refer to your local state for state specific tax requirements. A unique tax criteria businesses should be aware of when it comes to this industry, since cannabis is illegal under federal law, businesses cannot deduct expenses related to the production, sale, or distribution of cannabis on their federal tax returns. This can significantly impact a business’s financial health and profitability. Additionally, since cannabis businesses are cash-heavy, accounting for these transactions can be challenging, requiring specialized knowledge and software.

4. Recruitment and Retention

Recent reports showing the labor market reflect a tight labor market. Staffing exports recommend when it comes to recruiting you should:

• Know what you are looking for when it comes to your candidates
• Search the right places
• Differentiate or set yourself apart
• Let your employees serve as your ambassadors
• Tailor your pitch to the individual
• Leverage social media to help you approach

Cannabis is a highly competitive industry, with many businesses vying for a limited pool of skilled workers. As such, businesses need to be strategic about recruitment and retention. HR departments must develop competitive compensation packages, benefits, and professional development opportunities to attract and retain talent in this fast-paced industry.

Recommended Reading: Biggest pain point with Payroll and HR software

Conclusion

In conclusion, managing the back office for a cannabis business requires specialized knowledge and expertise. HR and payroll professionals need to be up-to-date with the latest laws and regulations, understand the unique challenges of the industry, and have specialized software and tools to manage taxes and accounting. By investing in their back-office operations, cannabis businesses can streamline their operations, minimize risks, and remain competitive in this rapidly evolving industry. When leveraging companies for payroll, benefits and HRIS requirements, it is recommended to partner with an organization that has expertise in this industry.

Get in touch with us for an expert-led demo to know more about UZIO payroll services.

Contact UZIO

Quick links

• 
  Introduction
  
• 
  Benefits to the payroll funding companies
  
• 
  – Tax Filings
  
• 
  – Streamlined Operations
  
• 
  – Enhanced Customer Experience
  
• 
  – Improved Compliance
  
• 
  – Scalability
  
• 
  – Access to Data Analytics
  
• 
  Conclusion
  

Introduction

As a payroll funding company serving the staffing industry, you typically differentiate by the speed of your funding decision, by being a trusted advisor of your staffing client and by providing excellent customer service. You can create one additional differentiation by partnering with a top-notch end-to-end technology provider for the staffing industry.

In this article, we will highlight the benefits for the payroll funding companies of partnering with an end-to-end technology provider for the staffing industry.

Benefits to the payroll funding companies of partnering with an end-to-end technology provider for the staffing industry

Payroll funding companies provide essential financial services to the staffing industry, helping staffing agencies manage their cash flow, reduce risk, and grow their business. From access to capital to reducing the agencies exposure to financial risk by assuming the risk of non-payment, payroll funding companies help staffing agencies grow their business.

However payroll funding is a very competitive industry where a lot of capital is running after a limited number of staffing agencies. In addition to using their customer service and speed of funding as their differentiator which almost all the payroll funding companies claim, they can develop true differentiators by leveraging technology. They can do that by developing strategic partnership with an end-to-end technology provider focused on the staffing industry to offer following benefits to their clients.

Tax Filings:
One of the biggest risks payroll fundings companies take is around timely and accurate tax filings by their clients. If the staffing agency fails to file the taxes accurately and on time, the penalties levied by the IRS can create significant challenges both for the client as well as the payroll funding company. The payroll funding company can avoid this risk by ensuring taxes are filed properly by ensuring that the staffing agency is using the payroll technology solution they have vetted before.

Streamlined Operations:
An end-to-end technology provider can offer a comprehensive suite of solutions that streamline the payroll funding process, including applicant tracking, onboarding, payroll processing, invoicing, and reporting. This can result in greater efficiency, accuracy, and reduced costs.

Enhanced Customer Experience:
By partnering with an end-to-end technology provider, payroll funding companies can provide a seamless customer experience that enhances their reputation and improves customer loyalty.
Increased Automation: An end-to-end technology provider can automate many of the manual processes associated with the payroll funding process, reducing the risk of errors, increasing accuracy, and speeding up the entire process.

Improved Compliance:
Compliance requirements in the staffing industry can be complex and ever-changing. An end-to-end technology provider can help payroll funding companies stay up-to-date with regulatory changes and ensure compliance, reducing the risk of fines and penalties.

Scalability:
An end-to-end technology provider can offer scalable solutions that can grow with payroll funding companies, enabling them to take on more clients and expand their business without significant investment in additional resources.

Access to Data Analytics:
An end-to-end technology provider can offer data analytics and reporting capabilities that provide insights into payroll funding operations. This can help payroll funding companies make data-driven decisions and identify areas for improvement.

Recommended Reading: Biggest pain point with Payroll and HR software

Conclusion

In conclusion, partnering with an end-to-end technology provider for the staffing industry can provide numerous benefits for a payroll funding company. By leveraging the advanced tools and systems offered by these providers, payroll funding companies can streamline their processes, improve efficiency, and reduce costs, all while delivering a better experience to their clients. Additionally, by working with a technology provider, payroll funding companies can stay ahead of the curve in terms of technological advancements and industry trends, enabling them to remain competitive in a rapidly changing landscape. Overall, the decision to partner with an end-to-end technology provider can be a game-changer for payroll funding companies looking to grow and succeed in the staffing industry.

Get in touch with us for an expert-led demo to know more about UZIO payroll services.

Contact UZIO

Quick links

• 
  Introduction
  
• 
  What is a Credit Reduction State?
  
• 
  How Does this Affect You as an Employer?
  
• 
  How to Report the Credit Reduction
  
• 
  How to Calculate the Credit Reduction Liabilities
  
• 
  What to Lookout for in 2023
  
• 
  Conclusion
  

Introduction

Recently the US Department of Labor announced a FUTA credit reduction that impacts the 2022 FUTA liabilities in 5 states.

State	FUTA Credit Reduction	Additional Cost / Employee
California	0.3%	$21.00
Connecticut	0.3%	$21.00
Illinois	0.3%	$21.00
New York	0.3%	$21.00
Virgin Islands	3.6%	$252.00

The DOL announced that employers in these states had an outstanding federal unemployment insurance loan which resulted in a credit reduction of 0.3% for calendar year 2022.

What is a Credit Reduction State?

A State is considered a credit reduction state if it has taken out a loan from the federal government to meet its state unemployment benefits liabilities and has not repaid the loans within the allotted due date. States have two years to repay this loan. Should a state have an outstanding balance on January 1 for two consecutive years and does not repay the full amount by November 10th of the second year, it then becomes a credit reduction state until the loan is paid in full.

The DOL (Department of Labor) runs the loan program and makes the credit reduction announcement each year. Additionally, more credit reduction programs may be applicable for a state entering their third and fifth year if the loan is not repaid.

How Does this Affect You as an Employer?

As an employer in a credit reduction state, you will likely owe more in federal unemployment taxation at the end of the year when filing your annual form 940. The current FUTA rate is set at 6% on the first $7,000 in wages per employee. However, employers are granted a 5.4% credit reducing the rate to 0.6%. Being in a credit reduction state will increase the annual rate by 0.3% each year. In addition to the increase in tax liability your company will also be required to file a Schedule A along with the 940. The schedule A will breakdown the liabilities per state for a company in multiple states.

Any increased FUTA tax liability due to a credit reduction is considered a fourth quarter liability and is due by January 31st of the following year.

unemployment benefits liabilities and has not repaid the loans within the allotted due date. States have two years to repay this loan. Should a state have an outstanding balance on January 1 for two consecutive years and does not repay the full amount by November 10th of the second year, it then becomes a credit reduction state until the loan is paid in full.

The DOL (Department of Labor) runs the loan program and makes the credit reduction announcement each year. Additionally, more credit reduction programs may be applicable for a state entering their third and fifth year if the loan is not repaid.

How to Report the Credit Reduction

The additional FUTA liability will be reported on the 940 via the schedule A form. This form will list each state allowing the company to select the check box and insert the FUTA taxable wages the employer paid in each state. If no wages were paid in a certain state the check box and the wage box will remain blank.

How to Report the Credit Reduction

The FUTA credit rate will be reduced by 0.3% each year until the state is no longer considered in a credit reduction state. Below you will see a yearly breakdown of FUTA liability per employee on the annual $7,000 wage base.

Tax Year	FUTA Tax Rate	FUTA Liability per ee wage base of $7,000
2021	0.6%	$42
2022	0.9%	$63
2023	1.2%	$84

What to Lookout for in 2023

In November the DOL will begin to release more information on which state is considered a credit reduction state. Once this information is made available they will release the updated credit reduction to be applied to the fourth quarter tax liabilities for those states still impacted. Adjustments will need to be made at that time to the companies 940, Schedule A, and FUTA tax liability calculations.

For more details on the Federal Unemployment Credit reduction please visit the IRS and DOL websites.

Recommended Reading: Biggest pain point with Payroll and HR software

Conclusion

For employers, the FUTA Credit Reduction can be a significant financial burden, especially if they have a large workforce. However, with the help of payroll technology platforms, employers can easily calculate and manage their FUTA tax liabilities, including any credit reductions and stay compliant with federal and state tax laws. By automating the calculation and management of FUTA tax liabilities with the use of a good payroll technology platform, employers can focus on growing their business.

Get in touch with us for an expert-led demo to know more about UZIO payroll services.

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