State unemployment insurance (SUI) pays stipends to workers who have lost their jobs through no fault of their own and are seeking employment. When an employee claims unemployment insurance, they typically get paychecks from their state’s unemployment agency until they have successfully found work or they hit the end of the time period allotted by their state.
Who pays for SUI?
Employers pay for SUI quarterly through their share of payroll taxes. Each state taxes employers to fund SUI. Your SUI tax rate is specific to your business; it’s based on the “wage base” set by each state and the number of your former employees who have filed for unemployment benefits in the past. In most cases, the more of your former employees who have collected unemployment benefits, the higher your SUI tax rate might be.
Who qualifies for unemployment benefits?
Employees who were terminated for no fault of their own qualify for state employment benefits. In general, that means employees who were laid off, and not fired for misconduct, can claim unemployment insurance.
If a former employee of yours files for unemployment insurance, who you don’t believe is eligible, you can contest the claim. Click here to learn more.
Is my company required to pay taxes to fund SUI?
If you have employees, then yes, you have to pay taxes to fund SUI. The Federal Unemployment Tax Act requires it for every state where your company has employees. Now, if you have employees who work in multiple states, things can get a little more tricky. You’ll want to work with a CPA or payroll provider to figure out which state you owe SUI taxes to for each employee.
I better get on this, huh?
Yeah, SUI is mandatory for all employers, and depending on your company’s situation, could be complicated. But, no worries, your CPA or payroll provider can help you manage it all.Updated January 31, 2018
This article provides general information and shouldn’t be construed as tax advice. Since tax rules may change over time and can vary by location and industry, please consult a CPA or tax advisor for advice specific to your business.