2014 guide to unemployment insurance

While the federal and state legislative landscape underlying UI tax can be complex, proactively managing this cost is both feasible and prudent.

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Unemployment insurance (UI) can be a significant employment-related cost and, unlike many other business taxes, can be directly influenced by management performance and organizational behavior.

Compared to other business taxes, UI tax rates can also respond more quickly to the local economy due to some state laws that call for automatic employer contribution adjustments based on factors such as the average wage, inflation, the jobless rate and/or the state’s UI trust fund balance.

Additionally, when state UI trust funds fail to keep pace with UI benefit payouts, businesses in those states may be asked to bear additional costs in the form of special state assessments and/or an increase in the federal unemployment insurance (FUTA) tax rate.

Consequently, and particularly for large, multi-state employers, unemployment insurance costs can vary significantly from one year to the next depending on organizational changes (e.g., merger, acquisition), UI benefits charged to the employer’s accounts, changes in the UI wage base, adjustments in the base UI tax rates and fluctuations in special assessments (e.g., bond or interest surcharges).

While the federal and state legislative landscape underlying UI tax can be complex, proactively managing this cost is both feasible and prudent.