Experience Rating

The system for determining each individual employer’s tax rate is known as Experience Rating. It takes into account both the employer’s experience with insured unemployment and the size of the employer’s taxable payroll. An employer must have had at least three consecutive experience years to be eligible for experience rating. An experience year is the twelve-month period from October 1 through the following September 30 during which contributions have been credited to the employer’s account and benefits have been chargeable to that account. A series of nine experience rating schedules have been set by law under which employer rates can range from a low of 0.6% in Schedule A to a high of 10.0% in Schedule I.

The employer tax rates in these schedules include a 0.21% Job Development Assessment which is credited to the Job Development Fund.

Click here to view the UI Tax Schedule Table.

Computation of Individual Employer Tax Rate

At the close of each experience year (September 30) the ending balance in each employer’s account is divided by the employer’s average annual taxable payroll over the last three years ending on the preceding June 30. The result, expressed as a percentage, becomes the employer’s account reserve percentage. This percentage is used to determine the actual tax rate to be assigned to the employer, in accordance with the Tax Schedule in effect for the following calendar year.

A new employer (one who has been subject to the provisions of the Employment Security Act for less than three full experience years) will be assigned a rate based on the State’s five-year benefit cost rate for employers not eligible for any experience. This new employer rate is computed each year and must be at least 1%, but cannot be more than 4.2%.

Successor Employers

A “successor employer” is any employer who acquires a business, or substantially all assets of a business, which was required to pay Employment Security, Temporary Disability Insurance, Job Development Fund and Reemployment Fund Taxes. The successor employer will be assigned the experience rating account of the former owner. For a list of factors that affect all successor employers, please contact the Employer Tax Unit at (401) 574-8700 (Option 1).

Deficit Surtax

Whenever the amount in the Employment Security Fund available for benefits, minus any federal advances, is less than zero at the end of the second month of any calendar quarter, every employer will be required to pay a surtax of 0.3% of their taxable wages for that quarter in addition to their regular contributions.