Page 282 - Essentials of Payroll: Management and Accounting

Unemployment Insurance
benefits. Thus, a layoff in one year will likely be followed by a notice
of increase in the state unemployment tax (or “contribution”) rate.
The taxable wage base used by states is required by federal law to
be at least as much as the federal level, which is currently set at $7,000.

Exhibit 10.5 shows the employer tax rates, employee tax rates (where
applicable), taxable wage limits, and coverages for all 50 states, plus the
District of Columbia and Puerto Rico. There is also a column listing
the new employer tax rate, which is the default tax rate given to any
company that does not yet have an experience rating. This default rate
can change in some cases (see Note 1 to Exhibit 10.5), depending on
the industry in which a new organization is based; industries with his-

torically high employee turnover rates deplete the state unemployment
funds more rapidly, so companies operating in those industries are
assigned a higher contribution rate.
When a person’s employment is terminated, he or she goes to the
local state unemployment office and applies for unemployment benefits.
The state agency then sends a form to the company, asking it to verify
basic information about the former employee, such as the amount of
hourly pay at the time of termination and the amount and composition
of the severance payment. After verification, the state sends the employer

another form, notifying it of the maximum amount of unemployment
benefits that can be paid to the employee (which can be greatly reduced
if the employee finds work soon).A key issue in this process is whether
an employee was terminated for cause (such as theft), was laid off, or
voluntarily resigned.Unemployment benefits are not paid when a person
quits or is terminated for cause, so be sure to contest employee benefit
claims if either was the cause for termination. Proper documentation of

the termination is crucial to this determination, which is made by an
employee of the state division of employment. If determination is
made in favor of the former employee, then any benefits paid will be

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