ST. GEORGE – Small businesses are experiencing a notable increase in unemployment insurance rates. This increase is making some small business owners contemplate whether to stay in business.
John Staples, owner of Audio Installation Co. (AIC) in St. George, said his unemployment insurance rate last quarter was $736 – this quarter, his rate is $3,400.
Staples said he has three options to stay in business.
“I can get rid of another employee and pick up the work myself, so instead of working 60 hour weeks … I’ll be working 70 hour weeks,” Staples said. “Or I can shut down the business. Or I can cheat.”
If business owners have their employees become independent contractors, then the business owners don’t have to pay unemployment insurance.
However, Staples said his parents didn’t raise him to cheat.
“Cheating has never been in my nature or something that my business has ever done,” Staples said. “We’ve never cheated on our taxes or insurance – that’s not how I was raised. But now it’s an option that’s weighing heavily on my mind, because I can take the few employees I have left and turn them into private contractors.”
Staples said the state of Utah has made it clear that they will look for businesses that “cheat” in this way and penalize them.
Staples is doing everything he can to cut costs. Everyone in his company, including him, no longer has health insurance, paid vacation, 401(k), or any benefits at all. Despite these efforts to cut costs, Staples says he knows that he still needs to let an employee go.
“I look at my office lady. She runs the whole office,” he said. “I look at the guy that runs the installations in the field, who has been with me for seven out of my 11 years. And the guy who does all my sales been here since day one. I look at them in the face and say, I know one of them should go. How do I tell a family you’re going from making $3,300 each month to $1,200 on unemployment? I just can’t do that. It’s hard to do.”
Utah state senator Steve Urquhart said several economic factors have influenced the rise in Utah unemployment insurance rates.
“ You have a lot of businesses going out of business and a lot of businesses that have shed employees,” Urquhart said. “(Those businesses are) not paying as much into the (unemployment insurance) fund.”
Furthermore, Urquhart said, more money is being taken out of the unemployment insurance fund because so many people are on unemployment insurance benefits.
The state legislature has also extended unemployment insurance to 73 weeks and raised the amount of money that beneficiaries get each week. That “puts a heavier burden on existing businesses,” Urquhart said.
Utah has the 10th-highest maximum unemployment insurance rate in the nation, at 9.2 percent. California, Nevada, and Florida all have lower unemployment insurance rates.
Copyright St. George News 2011