SUTA Debacle

A Bullhorn client, Neil Bernstein of All Medical Personnel in Florida, just sent me this article about Florida’s unemployment insurance crisis: http://bit.ly/7acB6o. Because the federal government extended unemployment benefits last year, many state unemployment insurance funds are headed for bankruptcy unless they dramatically increase rates in 2010. For most employers, this is troubling, but for staffing firms placing employees in temporary assignments, this will be crippling. Because unemployment fees are front end loaded into the first 8 weeks of employment, unemployment is a big expense for staffing firms because of the short duration of most staffing assignments. Compound that with the fact that staffing firms typically have very high unemployment experience ratings and you have what amounts to a massive increase in costs for staffing firms. And firms engaged in long term contracts with their clients will be unable to pass through these costs. This means that for lower wage employees, contract margins will likely swing into the red.

This problem is particularly acute in states like Florida, but is affecting the entire country. Staffing and recruiting firms are subsidizing a large portion of the unemployment benefits extension. Considering temporary workers only account for 2% of the US work force, this doesn’t make a lot of sense. And this issue is extending the staffing industry’s worst downturn in its history. The media focuses a great deal of attention on the losses the automotive industry has suffered, yet the staffing industry employs nearly the same number of employees nationwide and it took a staggering 25-30% hit last year. In fact, the staffing industry probably should have received TARP or stimulus funds in 2009. Perhaps it’s time the industry started to make some noise. As a staffing industry executive, in case if you haven’t done so already, it’s time to contact your state representatives. And it’s also time to get involved with the American Staffing Association (ASA) so they can get their lobbying efforts into high gear and get the industry some much needed relief.