Employer UI taxes going down in 2016

At the May 19th meeting of the Advisory Council, the Department of Workforce Development confirmed that employers’ unemployment taxes will be going down in 2016 because the case balance in the UI Reserve Fund will be $500 million or larger on 30 June 2015.

Currently, employers are paying taxes based on Schedule A tax rates. In 2016, employers will switch to Schedule B. Those employers with negative or overdrawn balances on their individual UI tax accounts will still pay the same tax rate. But, those employers with positive account balances will see a reduction in their unemployment taxes. Two charts — one for small employers and another for large employers — detail the reductions.

New employers will also see an immediate reduction. Small employers will go from 3.6% to 3.25%, and new, large employers will see their UI tax rate decline to 3.4%, down from 4.1% (the difference between small and large employers are whether taxable payroll is under or over $500,000 — keep in mind as well that taxable payroll for UI purposes is only the first $14,000 in wages being paid to an employee, so a large employer for UI purposes has around 36 employees).

Back in November 2013, the Department presented the Advisory Council with various charts about how unemployment taxes and tax rates were spread across industries. Page four, in particular, shows that manufacturing accounted for almost 25% of the payroll subject to unemployment taxes even though manufacturing jobs were 16.4% of the labor force. Other data available in this handout concerns negative account balances by industry (see p.5). Not surprisingly, construction has the most employers and the total negative balance for those employers was nearly $20 million in October 2013. For those in construction or manufacturing, the charts on pp.7-9 provide comparative data you might find useful.