State Unemployment Tax Alternative: Compensation Insurance | Corporate Synergies

Alternative to Paying State Unemployment Taxes Saves Non-Profits Thousands

By | Corporate Synergies | 6.1.2016

As a non-profit organization, you know that turnover can be high in your industry. This reality leads to high state unemployment taxes for non-profits. Frankly, it’s become a significant burden across the industry with many non-profits paying more in unemployment taxes than the benefits paid to their former employees.

However, it doesn’t have to be that way.

An increasing number of 501(c)(3) non-profit organizations, public employers, and Native American tribes are embracing unemployment compensation insurance and thereby avoiding paying the increasingly onerous unemployment tax.

Understanding State Unemployment Taxes for Non-Profits
First, it’s important to understand how unemployment taxes work.

For-profit employers pay federal unemployment taxes, but 501(c)(3) non-profits are not required to do so. However, in most states, non-profits do have to pay state unemployment taxes, unless they choose an alternative: purchasing unemployment compensation insurance.

State unemployment taxes are based on the organization’s payroll and claims history, and can be a burden. Insiders expect these taxes to rise in the years ahead. Most states pay out more in unemployment benefits than they receive in taxes, so states are attempting to make up that shortfall by raising taxes. For non-profit employers, this looming threat creates an air of uncertainty in what is already a difficult economic environment. With budgets so tight, they’re looking for ways to minimize any and every expense without creating an undue burden on staff.

And unemployment compensation insurance can do just that for non-profits with the right profile.

A Better Way
For non-profit organizations that choose to purchase unemployment insurance, it is a way to:

  • Avoid paying the state unemployment tax
  • Reduce spending
  • Reduce risk
  • Eliminate administrative headaches
  • Provide a better experience for employees and former employees

Non-profits need financial predictability. Unemployment insurance can save these organizations tens of thousands of dollars on state unemployment taxes and lessen their administrative burden.

With unemployment insurance, non-profits receive straightforward, efficient coverage from the first dollar spent toward benefits. Purchasing unemployment insurance removes an organization from the unpredictability of being part of the larger pool; the evaluation is focused solely on the organization’s specific claims and future expectations. This means the non-profit is not in a situation in which it’s subsidizing other non-profits that have higher unemployment expenses.

Finding the Right Partner
Corporate Synergies is uniquely qualified to assist non-profit organizations in the management of their state unemployment tax expense. We help them save time, money and headaches. For instance, Corporate Synergies manages any unemployment claims made against its non-profit clients, meaning the organization gets relief from having to manage those claims, which can require significant time.

Corporate Synergies works with a number of non-profit organizations in many states. We understand the unique culture of mission-driven organizations, speak their language and understand what matters.


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