Higher health insurance costs, new 1099 regulations, and now increased payroll taxes?

That’s the latest expectation from President Obama’s proposed budget, set for unveiling next week.  The big news for small businesses: the budget is expected to replenish states’ dwindling unemployment funds by increasing payroll taxes.  This will happen by raising the amount of unemployment-taxable wages to $15,000—more than double the $7,000 which has held steady since 1983.  This plan, which would take effect with other new tax laws in 2014, stands to increase payroll taxes by over $100 billion over the next decade.

But is this plan merely borrowing from Peter to pay Paul, at a time when the Obama administration is trying to improve relations with business groups?  Keep in mind, unemployment insurance is a joint federal-state program.  State governments must pay the first 26 weeks of unemployment benefits and have had to borrow heavily from the feds to meet this requirement.  To bridge last year’s gap, more than 40 states had to increase their unemployment-insurance payroll taxes.  What will happen to the tax rates under the new plan is up to the individual states and is anyone’s guess.  One thing is for certain—it appears rebuilding the unemployment fund will fall squarely on the backs of businesses.

The economic and unemployment crises appear to be taking their toll on the traditional ways Americans obtain health insurance.  Gallup’s latest health insurance poll shows a new low in November: just 44.8 percent of Americans report receiving health-care benefits through an employer.  This figure is down from 50 percent in January 2008, when Gallup first began tracking it.  While the percentage of Americans with employer-based health care continues its steady decline, the percentage of Americans with government-based health care, such as Medicare, Medicaid, or military/veterans’ benefits, remains elevated at 26 percent.  At the time of the poll, nearly one in six Americans report having no health insurance—a figure which rose sharply in late 2008 and has remained high.

These figures arrive amidst continuing turmoil around ObamaCare, which, in part, would require all Americans to buy health insurance starting in 2014.  A Virginia U.S. District Court judge recently ruled this portion of the Affordable Care Act unconstitutional, which makes the future of American health care even more uncertain.  A major goal of ObamaCare is to decrease the number of people without health coverage, even if those people have to purchase insurance on their own.

So far, the percentage of uninsured Americans is elevated but holding steady.  Instead, while employers are steadily eliminating health-care benefits, government-based programs are picking up new candidates in baby boomers eligible for Medicare and in unemployed workers relying on Medicaid.

Severance pay: an employer’s monetary gesture of goodwill to an employee separating from employment.

In times of layoffs and position elimination, this term has become more relevant to the modern workplace.  It’s a nice gesture to be able to provide severance pay to good employees leaving the business, even if it’s not a legal requirement.  (Be mindful, though, that severance policies might be written into certain employees’ contracts or in the employee handbook, which would create an obligation to pay severance.)

What does a typical severance package look like?  Usually, the higher the climb up the corporate ladder, the higher the severance package.  A severance package for a typical worker would be 1–2 weeks of pay per year of service.  At the executive level, severance may mean up to a month’s pay for each year of service.  An employment contract often imposes severance packages for the most senior positions.  In these cases, severance packages could go beyond additional pay to include extended benefits and outplacement services.

In some cases, a laid-off employee may try to negotiate a more favorable severance package.  If no precedent or written policies exist for severance packages, negotiations may be feasible.  Legally, however, an employee’s attempt to negotiate constitutes rejection of the severance package and entitles the employer to withdraw the offer altogether.  While that seems tempting, it may be best to tell the employee up front that the offer is nonnegotiable, especially if you are laying off other employees and want them to sign release of claims forms.

A release of claim form prevents the laid-off employee from bringing suit against the business in the future, and a severance package is the incentive to sign that form.  Obtaining this form is important; last thing any business needs after downsizing is a torrent of lawsuits!  Also be sure to get a separate release from workers over age 40 to prevent age discrimination suits.  Pay careful attention to any legal deadlines regarding extending and accepting these offers.

In this tumultuous economy, offering severance packages to laid-off employees is a goodwill gesture that acknowledges their dedicated service.  A severance package can also help calm angry, departing employees and can help save the business from legal troubles.  At the end of the day, the decision to offer a severance package is at the employer’s discretion, but a short-term payout may be well worth the long-term benefits of an act of kindness.

Brandon Carl, our Business Development Manager, chatting about Human Resources outsourcing and GHRO with Ciaran Foley on LookSee.TV!

2010-08-10 Brandon Carl and GHRO Discuss Outsourced HR from Ciaran Foley on Vimeo.

Good news, job seekers: October marked the tenth consecutive month of increased hiring in the private sector.  October’s addition of 159,000 net new private sector jobs indicated the highest increase of any month since April.  Could this mean businesses are moving past the hiring slump?

Only a few employment sectors benefited from October’s new jobs. Education and health led the pack with 53,000 new positions, followed by temporary agencies with 34,900, retailers with 27,900, and bars and restaurants, which hired 24,400 new workers.  Construction businesses also added a small number of jobs.  On the other hand, the manufacturing industry cut 7,000 positions.  The public sector also continued to cut jobs in October, by 8,000 workers.

On the brighter side, workers in every employment sector enjoyed small but important gains.  The number of hours in the work week enjoyed a modest increase to 34.3 hours, and average paychecks gained a few percentage points to settle at $780 per week.

Despite all the positive additions, the unemployment rate for October remained steady at 9.6 percent.  Of the 14.8 million unemployed Americans, 6.2 million have been out of work for six months or more.  Nearly two million new jobs have been added in 2010, but that recovery represents only a fraction of the eight million jobs lost in 2008 and 2009.  To merely sustain population growth, up to 150,000 net new jobs must be added each month.

Although October’s job gains are modest, they’re a good sign that the economy is slowly improving.  Every extra dollar in people’s pockets means more money to infuse into and revitalize the economy. That’s news every American can appreciate!

Via Yahoo! News