TYPES OF RATES
New Employer Rate
When a business starts to pay wages for the first time, it is assigned a "new employer" basic contribution rate of:
- 3.5 percent for new employers (Non-construction)
- 9.7 percent for new employers (Construction)
The new employer rate is increased or decreased by the
surcharge adjustment, if the surcharge is in effect. The following chart identifies the total rate assigned by law:
|| Newly Liable Rate for Non-Construction Employers
|| Newly Liable Rate for Construction Employers
| 2013 - 2017
The new employer rate is multiplied by the amount of
taxable wages paid by the employer to determine the employer's contribution liability.
The new employer rate will apply to an employer for the first two or three calendar years that the employer pays wages. After that time, the employer may have sufficient experience to receive a computed rate or will receive a standard rate.
Contributory employers who have a sporadic employment history may be assigned a standard contribution rate after they no longer qualify for new employer status.
- A standard rate would be assigned to an employer who files "None" reports (no gross wages) during each quarter of one of the last four years ending on the computation date (June 30th), because the employer would not have sufficient employment experience upon which to base a calculated rate.
- A standard rate would be assigned to an employer whose account is inactive, and less than five years later, the employer reactivates his account or opens a new business. The employer would be assigned a standard rate based on the balance in the reserve account.
One standard rate is assigned to employers with zero or positive reserve account balances, while a higher standard rate is assigned to employers with negative reserve account balances. The solvency measures in effect are added to the standard rates in accordance with the law. The following chart identifies the total rate assigned by law:
|| Standard Rate For Zero or Positive Reserve Account Balance
|| Standard Rate For Negative Reserve Account Balance
| 2013 - 2017
| 2018 - 2019
| 2020 - 2021
Computed (Experience-Based) Rate
Calculating an employer's tax rate
After an employer has provided covered employment and paid wages for approximately two complete calendar years, the employer may then be eligible for an experience-based rate. An experience rating system allows for variations in the contribution rates assigned to individual employers through the assessment of each employer's unemployment risk. The Office of UC Tax Services (UCTS) reviews an employer's unemployment compensation history and calculates a contribution rate each calendar year based on the accumulated experience through June 30 of the preceding year. Employers with high rates of unemployment can expect higher contribution rates, while employers showing a stable employment history and low unemployment can expect to receive lower rates.
An employer's experience-based contribution rate is comprised of six components. These components are:
These six components are added together to determine an employer's rate.
Delinquent employers are assigned a delinquency contribution rate that is 3 percent higher than the rate which they would otherwise be assigned. The 3 percent delinquency rate factor is assigned to employers who fail or refuse to:
- file all required registration documents; and/or
- file all required quarterly UC tax returns; and/or
- pay all contributions, interest or penalties due through the second quarter of the year prior to the calendar year for which rates are being calculated.
The delinquency rate assigned to delinquent employers is adjusted by the solvency measures applicable to the particular year. The delinquency rate is the sum of the
Basic Rate (Reserve Ratio Factor + Benefit Ratio Factor + State Adjustment Factor) +
3 percent (3%) + the
Solvency Measures (Surcharge Adjustment + Additional Contributions + Interest Factor, if applicable).
Appealing a Delinquency Rate
An employer may have their rate recalculated to the otherwise assignable non-delinquency rate by filing an appeal of the assigned rate within 90 days from the mailing date of the rate notice and:
- filing any outstanding registration documents
- filing outstanding quarterly tax reports and paying the balance due in full or entering into a payment plan that is approved by the department.
NOTE: If an employer defaults on an approved payment plan, the delinquency rate will be retroactively reinstated.
Clearing a delinquency or entering into an approved payment plan can save an employer approximately $300 per year per employee depending on the solvency measures in effect.