Small businesses in every state are required to pay into a fund for State Unemployment Insurance (SUI). This employer-funded tax provides short-term for employees who lose their jobs. The SUI rate that you pay will differ from state to state and vary according to how many of your employees apply for unemployment benefits after leaving your employ. If you are doing your payroll yourself, you will need to know how to calculate SUI rates. Depending on whether or not your state changes its rules and regulations or if your employee’s salary changes, or your own situation changes, updating your SUI rate may be necessary.
Just like with Federal Unemployment Taxes, you work from a wage base. You need to know the wage base that your state uses and if you have employees working in several states you need to know each wage base. And, you need to know if your state has an employer-only tax or if employees also pay. (Only Pennsylvania, New Jersey, and Alaska require employee contribution.)
If you have lots of employees applying for unemployment, you will have a higher SUI rate. Filing for unemployment is usually pretty easy unless an employee was let go due to documented misconduct. Doing a poor job is a valid reason to let them go but not an acceptable reason to not pay unemployment benefits. If you want to avoid paying benefits for someone who stole from you or otherwise caused trouble, you need to have solid documentation.
Doing your SUI tax withholding correctly takes time and effort. The better that you do the job the better the results will be. And, the less employee turnover that you have the lower will be your SUI rate.
All new businesses in the state of Missouri start with the “new employer rate.” The rate varies by industry as shown on this table from the Missouri Department of Labor.
A business will retain its new employer rate for two or three years and then the rate may be adjusted based on experience. The experience rate is based on the average annual taxable payroll, its unemployment benefit charges, and taxes previously paid.
Depending on the average cash balance in the Missouri Unemployment Trust Fund, the SUI rate may need to be adjusted. Rates may go up by 10, 20, or 30% or fall by 7 or 12%.
Additionally, non-profits can elect to simply pay the amount of benefits paid out instead of paying a tax and employers participating in the Shared Work Program will have a 9% rate as well as a maximum rate surcharge and contribution rate adjustment until they have demonstrated experience with the plan.
The point of the experience rate is to encourage employers to reduce unemployment, review claims, and maintain stable employment. The Unemployment Division tracks each employer account for taxable wages reported, paid contributions, and charged benefits.
Unemployment benefits paid are charged against the account and unemployment taxes paid are credited throughout the base period of the claim. This is done through July 31 and the data is used to compute the SUI when the employer is eligible for the experience rate.
The experience rate can range from 0% to 6%. A ratio is calculated by dividing the employer average account balance by its average annual taxable payroll. This calculation does not include the maximum rate surcharge or contribution rate adjustment. Shared Work Program rates can range from 0% to 9% and also do not include the contribution rate adjustment or maximum rate surcharge.
The State of Missouri will mail a notification of the new annual tax rate for employment insurance to employers in the month of November. This will be the applicable rate for the following year.
Unless you outsource your payroll to a trusted company, you will need to do this yourself. In that case, all new paychecks for the coming year will need to have the new rate. If you have a computerized payroll program you will need to make sure that it is updated and if you are doing manual payroll, you will need to make sure that everyone involved is on board with any change in SUI rates.
For help with your payroll problems and with updating your SUI as needed, contact us at Exigo Business Solutions in the Kansas City area.