Employers subject to the provisions of the Pennsylvania UC Law are responsible for withholding employee contributions based on total gross wages earned in covered employment as defined under the Law.
Wages include not only salary, commissions, bonuses and tips, but also sick or accident disability payments (except workers' compensation payments) made by an employer or third party (insurance company) and certain fringe benefits. Additionally, the cash value of payments made in a medium other than cash, such as lodgings and meals, are also considered wages.
For the periods in which employee contributions are in effect, all employers are required to withhold employee contributions at the time wages are paid, regardless of the method used to finance UC costs. These monies are a trust fund obligation and must be remitted to the Department of Labor & Industry with the filing of quarterly wage and tax information. Failure to withhold employee contributions and to promptly remit to the fund such contributions withheld in trust, can result in civil fines and/or criminal prosecution of the employer and/or personal liability; including the filing of liens against the employer and officers and agents of the employer.
Employee contributions are based on an individual's total (gross) wages and are not limited to the taxable wage base in effect for employer contributions. Employee contributions are not credited to an employer's reserve account, nor are they considered to be "contributions" for federal certification purposes under the Federal Unemployment Tax Act [FUTA].
Purpose of Employee Withholding
The employee withholding was included in the Law as a means of infusing additional revenue into the Pennsylvania UC system. It is tied to a "trigger mechanism" provision in the Law and is designed to keep the UC Fund level from becoming dangerously low or excessively high with fluctuating economic conditions.
The 1988 Amendments to the Law added the "trigger mechanism" provision that compares the balance in the UC Fund with the average benefit costs in the last three fiscal years, which determines the solvency percentage. The fund solvency percentage is calculated every July to determine which trigger level will be applicable for the next calendar year.
Computing Employee Withholding
Employee contributions are to be withheld from wages when paid to employees on the basis of the employer's regular payroll period. Refer to "Calculating Contributions, Penalties & Interest" for further information, including the applicable yearly UC withholding rates.
All calculations for withholding the employee contributions are to be made each payroll period, and are to be carried out to three (3) decimal places, dropping the excess and rounding to the nearest whole cent. For example, employee withholding of $1.235 to $1.239 will be rounded to $1.24, while employee withholding of $1.230 to $1.234 will be rounded to $1.23.