Rhode Island and Massachusetts business owners hit with higher unemployment taxes

Between pauses and shutdowns, being asked to purchase safety equipment like plexiglass and personal protective equipment, or PPE, local business owners have been put through a wringer over the last year.

"We're not all Warren Buffet here, you know. I am astutely aware of what it takes to meet payroll each Friday," Scott Hokanson, owner of Massachusetts based Brabo Insurance.

Hokanson has a unique perspective; he not only employs nine people, but also helps about 400 other employers with various business needs.

"I just want to sell insurance. My client just wants to be a painter, my client just wants to be a plumber, but they're stuck managing people's retirement plans, health plans, managing their taxes, getting their taxes paid to the state, to the fed," said Hokanson.

Add to the mix in 2021 higher unemployment insurance for businesses. Unemployment money doesn't grow on trees, it's paid by our local companies in the form of a tax, with each business kicking in a certain amount for qualifying workers. Because the pandemic forced so many people to collect unemployment, some states have seen drastic swings in their unemployment insurance (UI) trust funds.

Massachusetts, for example, could face a $5 billion deficit by the end of the year. Rhode Island's unemployment trust fund went from a robust $533.4 million last February (pre-COVID) and has dwindled down to a much slimmer $151.5 million on Wednesday.

The timing on the increases couldn't come at a worse time. Based on tax schedules, businesses in Rhode Island can expect to see a 14% increase in UI taxes for 2021, according to the state's Department of Labor and Training. That means In Massachusetts, the UI increase is a staggering 60% hike.

Rhode Island -- employer contribution increases from $495 to $567 per covered employee.

Massachusetts -- employer contribution increases from $539 to $858 per covered employee (increases to $925 over four years).

Gov. Charlie Baker tried to freeze rates, but the move stalled out in the state legislature at the end of year. It's since been reintroduced, the I-Team has learned.

"You want to be reducing costs for small businesses, they can't afford a 60 percent increase in something like a UI tax. States like Massachusetts and Rhode Island need employers to be creating and retaining jobs," said Christopher Carlozzi, state director in Rhode Island and Massachusetts for the National Federation of Independent Business.

Like many employers, Hokanson said that he laid off two employees last year because of COVID, but then brought them back. As for new hires, the state he said isn't creating an ideal climate.

"Boy, it is easy to not hire someone right now, meaning all the compliance, all the extra expenses that come with having an employee. It makes you think twice," explained Hokanson.

Rhode Island's top labor official told NBC 10 that employers will not be held responsible for pandemic claims.

"Employers should know that their experience ratings will not be impacted by employees filing COVID related claims," said Scott Jensen, director of Rhode Island's DLT.

Hokanson reminds employers to check or audit their claims last year to make sure they were processed correctly.