Risk

SUI Tax Management: Strategies to Control Your State Unemployment Tax Rate

Alison Duronslet

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State unemployment insurance (SUI) tax is one area employers can actively manage to help limit exposure—but do you have a plan in place? Does your organization fully understand who pays SUI tax and how it is calculated?

Understanding SUI tax and state unemployment obligations

Unemployment benefits are primarily funded by employers through payroll taxes, and there is a direct correlation between your state unemployment tax rate and the number of individuals collecting unemployment benefits against your SUI tax account. While employers can take steps to limit increases in this area, doing so requires a comprehensive approach. Understanding your options for managing your SUI tax rate and how partnering with an expert in unemployment claims management services can help is key.

Managing unemployment claims to control your SUI tax rate

How does your organization handle unemployment claims management? As individuals file for unemployment benefits, states require prompt and accurate information from you to determine eligibility for benefits and if benefits are awarded, your company will be liable to pay those benefits. Key details such as the actual reason for separation, dates of employment, and any separation pay are critical, and each state has its own deadlines you must track to avoid losing the ability to respond, otherwise known as protest rights.

If your employee was terminated for cause or quit for reasons unrelated to work, failing to respond timely could result in your organization being charged for unemployment benefits in error, leading to higher SUI tax rates. Gathering all the documentation to appeal the eligibility determination and having to appear in an administrative hearing can be time-consuming and costly while managing your day-to-day operations.

Reducing your SUI tax rate through strategic planning

Beyond timely claims responses, employers can take additional actions to help mitigate SUI tax rate increases.

Consider these five key strategies:

1. Complete an annual unemployment insurance tax audit for each SUI tax account. Have you reviewed your SUI tax rate notices to ensure all amounts and calculations are correct?
2. Evaluate the option to make voluntary contributions. Do you know which states allow you to "buy down" your SUI tax rate via a voluntary contribution and how to make those payments?
3. Consider applying for a joint experience rating account. Do your related businesses qualify for a common rating and would that result in a lower combined SUI tax rate?
4. Determine if merger and acquisition planning might be necessary. Does your strategic plan include business structure changes in the next five years?
5. Project future SUI tax rates. Do you understand the factors influencing your future SUI tax rates, and which are within your control for effective budgeting?

Implementing any of these strategies can be daunting, let alone knowing which combination would be best for your company. Are you leveraging an expert in unemployment claims and SUI management who can help you in this area?

Supporting separated employees can help lower state unemployment taxes

Offering outplacement services is another critical component in building a comprehensive SUI management approach while maintaining your brand reputation. Separated employees are faced with the frustration and challenges of competing against hundreds of other applicants as they search for roles that match their skill set. As an employer, you want to help them get back into the workforce quickly while managing organizational costs. To meet both needs, choose a solution that leverages both a data-driven and human approach, providing tools such as robust job searches for employees at all levels, assistance with resume writing and personal coaching sessions. Helping employees find new jobs faster helps reduce the amount of unemployment benefits paid, helping to maintain or even lower your SUI tax rate. Outplacement services benefit both your organization and your employees and ensure you are approaching SUI tax management from a holistic perspective.

Frequently asked questions about SUI tax management

1. What is state unemployment insurance?

The purpose of state unemployment insurance (SUI) is to provide individuals who are unemployed through no fault of their own with temporary financial assistance until they can secure a new job. Unemployment insurance benefits are funded through payroll taxes.

2. Who pays SUI tax?

SUI tax is paid by employers in all states but three: Alaska, New Jersey, and Pennsylvania, where employees are also required to make a small contribution. Unemployment payroll taxes vary based on the state your employees work in, and previous benefit charges applied to your account.

3. How do I find my state unemployment insurance tax rate?

You can find your state unemployment insurance tax rate on your unemployment tax rate notice. Most states issue state unemployment tax rate notices from October through December for the following year, but a handful of states mail them closer to midyear, such as Hawaii, New Hampshire, New Jersey, Tennessee and Vermont. Prompt review of these notices is key to help ensure you meet any deadlines for protest or voluntary contributions.

Manage your unemployment tax obligations

A comprehensive unemployment program that includes unemployment claims management, outplacement services, and tax rate analysis provides the synergistic impact of claims processing, faster reemployment of displaced associates, and review of SUI tax management. Those elements combined can help your organization decrease the potential for SUI tax rate increases.

Reduce organizational risk with unemployment claims management. Get the guidebook.