What Is The Employer Contribution Rate?

A newly liable employer is assigned the larger tax rate determined by alternative methods. The tax rate may be the average rate assigned to all employers plus one percent. Or the rate may be the average rate for employers in a comparable industry plus one percent. The tax rate can not be lower than two percent. After three years, when original liability is established before July 1st, the employer will have a tax rate computed with experience rate factors.

Experience rating is a procedure for varying employer rates and allocating costs of the unemployment insurance program in relation to the employer's actual and potential risk with unemployment. This is accomplished by the department keeping an individual experience rating account for each liable employer. All tax payments are added and all benefit charges are subtracted from the experience rating account. This provides an opportunity for contributing employers to "earn" a tax rate based on their own individual experience and their potential risk of unemployment. The procedure also helps to ensure an adequate trust fund balance.

Contributions are determined by multiplying a specified contribution rate times a taxable payroll determined on an $8,000 wage base earned by each employee during a calendar year.

The information on this page is meant to provide a general overview of the law. The laws in your state and/or city may deviate significantly from those described here. If you have specific questions related to your situation you should speak with a local attorney.

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