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Common Questions & Glossary of Terms
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Federal Insurance Contributions Act (FICA)
Federal Insurance Contributions Act (FICA) tax is a United States federal payroll (or employment) tax imposed on both employees and employers to fund Social Security and Medicare — federal programs that provide benefits for retirees, the disabled, and children of deceased workers. The tax also provides funds to the health care system for institutions that provide healthcare for workers who do not have health insurance and cannot afford healthcare treatment. Social Security benefits include old-age, survivors, and disability insurance (OASDI); Medicare provides hospital insurance benefits for the elderly. The amount that one pays in payroll taxes throughout one’s working career is associated indirectly with the Social Security benefits annuity that one receives as a retiree. This has caused some to claim that the payroll tax is not a tax because its collection is tied to a benefit. The United States Supreme Court decided in Flemming v. Nestor (1960) that no one has an accrued property right to benefits from Social Security. The Federal Insurance Contributions Act is currently codified at Title 26, Subtitle C, Chapter 21 of the United States Code.
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Federal Unemployment Tax Act (FUTA)
The Federal Unemployment Tax Act (or FUTA, I.R.C. ch. 23) is a United States federal law that imposes a federal employer tax used to help fund state workforce agencies. Employers report this tax by filing an annual Form 940 with the Internal Revenue Service. In some cases, the employer is required to pay the tax in installments during the tax year.
FUTA covers a federal share of the costs of administering the unemployment insurance (UI) and job service programs in every state. In addition, FUTA pays one-half of the cost of extended unemployment benefits (during periods of high unemployment) and provides for a fund from which states may borrow, if necessary, to pay benefits.
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State Unemployment Tax Act (SUTA)
The State Unemployment Tax Act (SUTA) describes state unemployment taxes imposed on employers. The majority of employers are responsible for paying federal and state unemployment taxes. Employers are responsible for paying an employee’s FUTA taxes under the Federal Unemployment Tax Act. Each state determines its SUTA tax rate. In most states, employers are responsible for paying state unemployment insurance taxes to fund their state unemployment insurance system.
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Professional Employer Organization (PEO)
A PEO company, or Professional Employer Organization, is defined as a business entity that provides human resources outsourcing services to client companies through the use of a co-employment relationship.
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Why should we change from our current practices?
Business owners want to focus their energy on the "business" of running their business. As companies grow, most owners do not have the necessary payroll and accounting skills, knowledge of regulatory compliance, risk management, insurance and employee benefit programs to meet the demands of being an employer
Business owners want to focus their energy on the “business” of their business. As businesses grow, most owners do not have the much-needed payroll and accounting skills, backgrounds in risk management, knowledge of regulatory compliance, insurance and employee benefit programs to meet the demands of being an employer.
Partners gives you access to many benefits and employment amenities you would not have otherwise.
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How does it benefit my employees?
Employees are drawn to financial security, quality health insurance, a safe working environment and opportunities for retirement savings.
When a company works with Partners, job security is improved as Partners designs efficiencies to lower costs.
Co-employment relationship with Partners provides employees with an employee-benefits package, including but not limited to a 401(k), life insurance, disability insurance, and flexible spending plans. -
Who uses Partners?
Any business can find value in a relationship with Partners.
Partners clients include a variety of different types of businesses ranging from construction, oil trades, and small manufacturing companies.
Many different types of professionals, including doctors, retailers, mechanics and engineers, also benefit from Partners. -
Will I lose control of my business?
No, you will retain ownership of the company and control over the operations. As co-employers, your company and Partners will contractually share employer responsibilities and liabilities.
Partners typically assumes responsibilities and liabilities associated with a general employer for purposes of administration. These responsibilities are typically administrative relief, employer liability management, and employee relief.
Human Resources with heart
Professional Employer Organizations help you throughout every part of your business from human resources to payroll processing. Regardless of whether you're onboarding, processing payroll, hiring, or just needing business advice, Partners HR gives you knowledge to focus on your business succeeding and achieving great things. We are honored to be a part of NAPEO.