It's 12:02 a.m. and the first moral of this story is, don't look at your financials late at night. I'm rifling through my
trash to retrieve a quote I saw earlier in the day: "Little things don't mean a lot. They mean everything." —Harvey Mackay
When I threw out the quote, I didn't think it would relate to my finances. But the truth is the small expenses add up fast—especially
when it comes to payroll costs.
Even though your payroll company summarizes the taxes withheld from your check every month, if you don't calculate the numbers
yourself, you won't understand the results. I'm the perfect example. I used to think the government withheld a number of different
types of taxes for such things as social security, Medicare, and unemployment at a standard rate and that these expenses by
themselves weren't exorbitant. More specifically, I'd thought all employers gave a certain percent of their payroll for the
state unemployment tax based on a fixed rate.
However, I recently learned that this is not the case at all. Rather, the government uses a mysterious "tax rate determination"
process to decide what you should pay. Part of what it looks at is your "experience rate," or the longevity of your employees.
You've heard that hiring right saves your practice a lot of money because staff turnover costs major dollars? Well, unemployment
tax is a huge chunk of that cost.
Here's what happened to me. Most of my clinics pay a few hundred dollars per month in unemployment taxes, but one clinic over
the years has had a higher turnover rate. Last year that clinic paid close to $1,000 per month. A few days ago, I checked
the clinic's profit-and-loss statement for the first quarter, and I found out I'm paying close to $2,000 per month just on
unemployment tax. I had no idea the state would take that much out of our payroll, but it looks like the government now wants
its employers to step up to the plate.
Here are two ways to learn from my mistake and save money:
1. Hire the best. Put serious effort into hiring the right employees the first time so you won't have to pay for their unemployment when they
leave the practice. If you have to let some team members go in slower times, you may think you're saving your practice a chunk
of change, but remember you're also picking up unemployment costs.
2. Fight paying unemployment. If you're letting a problem employee go, try to fight the unemployment claim. State boards are pro-labor, but if you document
the employee's poor performance and low attendance,. and you disclose job abandonment issues, you can definitely make your
case and save big in the end.
Veterinary Economics Advisory Board member Dr. Jeff Rothstein, MBA, is president of Progressive Pet Animal Hospitals and Management Group in Michigan.