Rising Costs for California Businesses- How Janitorial & Hospitality Providers Are Affected

At CSG, we believe in transparency. As a trusted partner in janitorial and hospitality workforce solutions, we want to keep you informed about upcoming changes that may impact pricing.

California businesses—including those providing cleaning and staffing services—are facing increased costs due to California’s FUTA Credit Reduction. While this may lead to price adjustments, we want you to understand why and how these changes ensure we continue delivering top-tier service.

Let’s Cover the Basics

What is FUTA?

Federal Unemployment Tax Act (FUTA) was passed in 1939. FUTA helps fund unemployment benefits, and normally, businesses receive a credit to reduce their tax burden.

The standard FUTA tax rate is 6.0% on the first $7,000 of each employee's wages. Unlike Social Security and Medicare taxes, FUTA taxes are paid solely by employers.

California’s Missed Deadline

During the COVID-19 pandemic, many states needed to borrow from the federal government to ensure that unemployed workers could continue to access unemployment benefits. This left states with outstanding loans and they were given a deadline to repay the federal government.

California didn’t meet the November 10th deadline to repay its federal unemployment loans. As a result, employers in the state will be required to help cover the cost.

Understanding the FUTA Credit Reduction

This leads us to the FUTA Tax Credit Reduction in California. The Federal Unemployment Tax Act (FUTA) helps fund unemployment benefits. Normally, businesses receive a credit to reduce their tax burden. Because California did not repay its federal unemployment loans by the deadline, the state has lost a portion of this credit.

This results in higher payroll taxes for businesses across the state.

3 Key Facts about the FUTA Credit Reduction

• California businesses will see a 0.9% increase in FUTA taxes on the first $7,000 of wages per employee in 2024.

• The increase applies retroactively to all wages paid in 2024, meaning additional tax payments will be due in early 2025.

• The higher tax rate adds to the overall cost of doing business in the state.

How This Impacts Janitorial and Hospitality Staffing Costs

Janitorial and hospitality staffing services are people-driven industries. With this tax increase, along with rising minimum wages and other regulatory costs, businesses must adapt to remain sustainable while continuing to support their hardworking employees.

Increased Operational Expenses

Beyond these taxes, businesses are also managing increased costs in:

• Wages and compliance requirements

• Workers’ compensation and liability insurance

• Regulatory compliance and safety standards

Why Prices Are Adjusting

Rather than compromising on quality, safety, or employee wages, service providers must adjust pricing to accommodate these rising costs. Price adjustments allow businesses like CSG to maintain our high standards of service, invest in our workforce, and continue to meet client expectations.

What This Means for You

We know price increases can be worrying, but our commitment to great service hasn’t changed. With a focus on business transparency, we want to be upfront about these changes so you can feel confident in the value we provide.

Moving Forward Together

At CSG, we are committed to providing reliable, high-quality janitorial and hospitality workforce solutions. While external factors may impact pricing, our top priority remains delivering the excellent service you expect. We believe in business transparency and maintaining the trust of our partners.

We offer a range of services, including janitorial cleaning, commercial cleaning, window cleaning, and managed hospitality staffing solutions. Safety is at the core of everything we do—we uphold strict safety protocols, provide ongoing training, and recognize team members who prioritize workplace safety. Our goal is to ensure a clean, safe, and well-maintained environment for your business.

If you have any questions about pricing changes or how they may affect your services, please don’t hesitate to reach out. We’re here to support you every step of the way!