Industry Overview

History
The legislation establishing the State Unemployment Insurance (SUI) system was
passed in 1935 in response the high unemployment experienced during the
Depression.  Federal and State unemployment insurance laws were enacted to provide
temporary short-term financial assistance to people who were out of work through no
fault of their own.  Benefits are not intended for people who voluntarily quit, are
discharged for misconduct, retire or withdraw in some other way from the workforce.

Federal statutes establish guidelines under which the states must administer its own
unemployment insurance program.  Eligibility, the amount of benefits, and the duration
of those benefits are determined in accordance with each state’s laws. Generally, the
funding of the system is based solely on a payroll tax levied on employers.

How It Works
Employer’s pay a payroll tax quarterly into an unemployment insurance account (sometimes called a reserve account).  When a claim is made, the state withdraws the payments from this reserve account.  In most states, the amount your company will pay is based on state law and the ratio of benefits paid to taxes paid.

Therefore, the amount of the premiums to be paid depends on the State’s records and their analysis of your company’s claims experience.

How Much Will I Pay in Taxes
SUI taxes are charged according to the quarterly amount paid each employee times the
tax rate.  For example In California the tax rate can be from 1.5% to 6.2% (this will vary by state).  The rate is applied to the first $7,000 of wages paid to each employee during the calendar year.   This is called the “Wage Base” and varies by state.  (Washington state is the highest and California is one of the lowest) This means that a California employer can pay from $434 per employee per year to as little as $105 per employee annually, a difference of $329 per employee per year.