Bert Gill refuses to believe that he is a victim of bureaucracy.
Despite the countless challenges a local restaurant owner during the COVID-19 pandemic and the mass unemployment crisis has had to face, another looms.
With the Florida Department of Economic Opportunity reporting 614,000 Floridians as jobless in December 2020, the increase in unemployment tax could be drastic for business owners like Gill who may already be facing the financial hardships resulting from the pandemic.
Furloughed employees, economic shutdowns ordered by the state, and an overall decrease in business are all major challenges already facing your local pizza shop and hair salon.
Now these businesses may have an additional burden to worry about: a tripled payroll tax.
Effective on Jan. 1, the Florida Department of Revenue increased the minimum unemployment tax rate from 0.1%, which was $7 per employee, to 0.29%, which is $20.30 per employee. The maximum rate remains the same from the previous year, which is 5.4% or $378 per employee.
Businesses who have not had to lay off any employees in the past three years are responsible for paying only the minimum rate, whereas businesses who have had significant layoffs will have to pay a higher rate.
This tax is then used to provide financial aid and relief to those who have filed for unemployment.
Gill, the owner of Mildred’s Big City Food in Gainesville, did have to furlough numerous employees as a result of the pandemic.
“This is truly something none of us in my industry ever expected, and that unemployment tax rate has to go up in other industries too,” Gill said. “They can’t just pick out restaurants.”
Fortunately for Gill, he was actually able to hire a few of these employees back as business began to pick up again. Others were also able to find employment elsewhere, so only two furloughed employees filed for unemployment.
Because members of his labor force were able to return or find employment elsewhere, Gill does not see the increased tax rate having a significant impact on his restaurant.
Nonetheless, the circumstances of the pandemic and the ongoing unemployment crisis may still trigger the following question: Is this the case for all businesses, or is Gill’s situation out of the ordinary?
In December, the Florida Department of Revenue is responsible for calculating and administering the tax rate in a mailed notice to all employers. The rate stated on the notice becomes effective Jan. 1, and employers have 20 days to file a protest to the rate if they choose.
Bethany Wester, a spokesperson for the department, explained that while the minimum unemployment tax rate did increase from the 2020 rate, not all employers’ rates increased proportionately to the rate change.
“Of nearly 590,000 employers, 83.3% saw no change, a decrease, or an increase of less than $50 in their rates,” Wester said.
Marc Schnoll, a certified public accountant with the CPA firm Sexton & Schnoll in Gainesville, described how local restaurants, bars and retail stores are typically the businesses that would be impacted most by the increased rate since they likely had to lay off more employees.
Schnoll also explained that since businesses pay their unemployment tax rates quarterly, they will not have to make their first payment until April.
In his experience, business owners who are notified about the rate change toward the end of the year do not fully appreciate what it means until they go to make their first payment about three months later.
“Typically, the change isn’t that meaningful,” Schnoll said. “In this particular case, we have talked to some clients where we recognize it is going to have a significant impact on them.”
One client in particular with a business of 10 employees was paying the lowest unemployment tax rate of $7 per employee in 2020, and they had one unemployment claim in the last year. As a result, their rate has increased to the maximum rate, and they are now paying $378 per employee.
So instead of paying about $100 a year as they did previously, Schnoll’s client will now be paying closer to $4,000 a year.
However, this is an extreme case among Schnoll’s clients. In fact, this was the only client who is not paying the minimum unemployment tax rate this year.
Schnoll also mentioned that this increased minimum rate is not as severe as it has been during previous unemployment crises.
As compared to previous minimum unemployment tax rates in Florida in the last 14 years, the 2021 minimum unemployment tax rate is lower than the rates from 2010 through 2014 following the 18-month Great Recession.
Florida’s minimum unemployment tax rate is also still lower than that of other largely populated states.
Of the largely populated states that have already reported their minimum unemployment tax rate for 2021, Florida’s minimum rate is much lower than that of California and Pennsylvania. It is also on par with Ohio and Illinois.
This shows how the new minimum unemployment tax rate may not have as significant an impact on local businesses in North Central Florida as one would anticipate for a near tripling of the rate.
Diane Scianimanico is the vice president of Evergreen Lawn Care, which provides landscaping and lawn services in the Gainesville and Jonesville areas. Fortunately for her business, she did not have to lay anyone off as a result of the pandemic since they only lost about 3% of their customers.
Scianimanico did say that despite not having to lay anyone off due to the pandemic, she would still be paying a slightly higher tax rate since a few former employees did file for unemployment in recent months.
So regardless of the employee not having been laid off by Scianimanico, her business is still required to pay a certain percentage toward their unemployment claim based on the amount of time they were employed for the company.
“I’m going to pay the higher tax rate regardless,” Scianimanico said. “It is just interesting to see how many people were trying to get unemployment.”
Scianimanico admitted that at end of the day all business owners do not want to pay a higher tax rate, but she still understands and appreciates the government’s way of letting people know they care.
Because her increase was so low, Scianimanico is not concerned about any long-term effects on her business, and she does not put much thought into it.
Stephanie Penny is the owner of itransformhair, another local business in Gainesville focused on hair styling. Like Scianimanico, Penny is not too concerned about the increased unemployment tax rate and its impact on her business since she is currently her only employee.
While Penny has hired other employees to work for her from 9 a.m. to 5 p.m. in the past, she is now hesitant to do so given the safety and financial risks associated with the pandemic.
“From a business owner’s perspective, I understand that since there were so many unemployment claims in Florida, [the government] has to try to replenish,” Penny said. “There is pros and cons, but hopefully they are giving businesses enough advanced notice so they can plan and budget accordingly.”
While there is potential that the minimum unemployment tax rate could still increase in the next few years, it appears for now that local businesses in North Central Florida are not suffering the repercussions just yet.
This remains a good sign for the economy and offers hope that your local pizza shop or hair salon will weather the economic downturn resulting from the pandemic. Even though the prospect of a tripled minimum unemployment tax rate seems burdensome, business owners like Gill are still remaining optimistic during this time as they continue to recover their businesses.
Correction appended: A previous version of this story stated that the Florida Chamber of Commerce raised the unemployment tax rate, instead of the Florida Department of Revenue, which actually implemented the increase.