Employment Law -- Employee

How Is The Unemployment Insurance Tax Rate For Other-Than-New Employers Computed?

Employers, other than those who are newly liable, are rated based on their experience in the UI program. The experience rate is designed to ensure that each employer contributes its fair share to the Trust Fund. Generally, higher rates are assigned to employers with high employee turnover because their unemployment “experience” results in greater Trust Fund outlays. Several factors determine the actual experience rate. These include:

  • the amount of unemployment insurance benefits paid to former employees that is charged to an employer’s account;
  • the amount of taxes paid;
  • the average size of an employer’s annual taxable payroll for the three preceding years.

An employer’s tax rate is also determined by the status of the Trust Fund. During each calendar year, one of six tax tables is in effect, depending on the balance in the Trust Fund as of September 30th. If the Trust Fund balance is low, one of the tables with higher average tax rates will be in effect. If the Trust Fund balance is higher, one of the tables with lower average tax rates will be in effect.