The other day a story passed through my e-mail box that detailed the sudden closing of a small staffing business in Pennsylvania. It seems the owners (a husband and wife team) woke up one morning and realized that they could no longer remain profitable because of escalating payroll taxes. They shut the doors that day...after finding other homes for their temp employees.
It was a story that
first reminded me why Ryan Staffing made the decision a few years back to stop
working in Pennsylvania. If you think taxes are bad for business in Ohio don't
try PA. But more importantly it made me think about our ability to pass along
increased costs to our clients....it is very hard to say the least.
So now the question
becomes are you better off paying a little more or should you just be content
to find another staffing supplier after yours is forced out of business?
What causes independent
staffing companies like Ryan Staffing to consider raising rates? It certainly
is not greed. Our mark-ups on average are about 20%-30% lower than they were 15
years ago. Mostly it is things that are not under our control.
The cost of labor has gone
up mostly because of the ever increasing Ohio minimum wage rate and the upward
pressure it puts on all hourly wages. While this does not impact a mark-up it
does influence other insurance costs that are based on total payroll such as
bonding, errors and omissions and general liability.
Unemployment taxes are
rising . In Ohio our fund is in debt to the Federal government to the tune of
$2.3 billion. Because we are not paying this back, our FUTA taxes are going up
.03% every year. State unemployment tax rates are rising another .03% or so per
year for Ryan Staffing despite the fact that our account with the state is
about $700,000 in the black. This is what a 99 week unemployment benefit system
has done.
The cost of defending a
bogus workers compensation claim and we get our share is a minimum of $1,500.
That includes legal fees, IME's, and MCO costs. Since 1999, we pay $0.40 out of
every dollar spent on workers compensation claims for administrative
costs....not medical or indemnity.
Providing credit for
clients by extending terms and limits has become an added expense in recent
times. And the number of bad debt dollars being written off because of dead
beat clients has increased significantly since 2008.
Administratively we are
required by law to process hundreds of wage garnishments, child support orders
and IRS levies daily. We have become a collection agency for the courts and
different levels of government. Every year we are required to participate in a
minimum of four census studies. Ryan Staffing is audited by the BWC every three
years and must have an annual certified financial audit to remain self insured.
We have to track and
collect sales tax for about 20 different counties in Ohio and deduct and pay
employee withholding taxes for about 75 different local municipalities.....and
pay/prepare corporate income taxes to all as well.
Drug testing and
background checking has become pretty standard in the staffing business. The
cost of a drug test has gone straight up over the past several years. And because
we must follow Fair Credit Reporting requirements for those that have criminal
records (about 40% of our applicants) processing those records has more than
doubled in the past year or two.
The point or
"tip" if you will to take from all of this that sometimes a rate
increase is inevitable because of circumstances not under the control of the
supplier. In the long run you have to ask yourself if the added cost is worth
the value you receive. The truth is that competition will keep everyone's costs
down. When one of us is forced to close competition is reduced and prices go
up...right?
Oh, and by the way, did
I mention the Commercial Activity Tax we pay on every dollar we bill or
newspaper ad costs that go up every year or....?
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