If you’re a stakeholder in HR, finance, or even the founder of a small to mid-sized company, you already know state compliance can get tricky, especially when it comes to fluctuating tax rates.
With that in mind, let’s discuss state unemployment insurance, commonly abbreviated SUI.
What Is SUI?
State unemployment insurance, or SUI, is an employer-funded tax designed to provide short-term financial support to employees who have been laid off or terminated without misconduct. If you’re operating a U.S.-based business — especially one that spans multiple states — you’ll find that SUI tax rates are diverse.
SUI has a storied past, serving as a cornerstone in the United States labor framework. Instituted to act as a financial safety net for workers between jobs, this employer-financed tax facilitates short-term financial support for eligible employees. The goal is to offer a financial buffer while people are actively on the job hunt.
SUI Tax Rate
SUI tax rates aren’t a one-size-fits-all. These rates are influenced by several factors, including your state of operation and your business’s experience rating.
Your SUI rate is determined by your experience rating, among other factors. In six states, a good experience rating could mean a 0% SUI tax rate. Conversely, in Arizona, companies with the highest experience ratings can face rates as high as 18.78% of each employee’s base wage.
New employers are looking at rates from 0.45% in South Carolina to 4.0% in Hawaii. The wage bases themselves also differ significantly, ranging from $7,000 to $67,600 depending on the state.
SUI vs. SDI and TDI
SUI is often mentioned with SDI (state disability insurance) and TDI (temporary disability insurance), but they serve different purposes.
While SUI focuses on unemployed individuals, SDI and TDI provide short-term disability benefits to those who are unable to work. These benefits usually max out at about six months and are state-dependent, unlike the more universally applicable SUI.
How Often Do Companies Pay SUI?
Here’s where timing enters the picture. Generally, employers remit SUI payments on a quarterly basis, aligning with standard payroll tax cycles.
However, this schedule can have a few twists. In states like New Jersey, Pennsylvania, and Alaska, a slice of the SUI tax comes directly from the employee’s paycheck.
So, while you might be mentally earmarking those funds as solely employer-funded, the reality may differ based on your location. Before you onboard your first team member, find some time to review your state-specific regulations.
How Are SUI Rates Calculated?
Understanding SUI rates is like piecing together a jigsaw puzzle — each element needs to fit perfectly for the picture to become clear. Generally, your SUI tax rate is determined by two major components: the wage base and the experience factor. Both are state-specific, so you’ll find some regional variations.
The Role of the Wage Base
The wage base is the maximum amount of earnings that can be taxed for SUI in a given year per employee.
For example, let’s consider a New York-based company. For 2023, New York established a SUI wage base of $12,300. If your entire workforce is stationed in the Empire State, that’s the wage cap that’ll be subject to SUI taxes.
The Experience Factor
The experience factor makes each SUI rate unique to the business.
Continuing with the New York example, the SUI tax rate for new employers in 2023 is 4.1%. This percentage is the sum of a 4% basic tax, a 0.75% subsidiary tax, and a 0.075% reemployment services fund contribution.
The experience factor adjusts based on your specific business operations, such as the number of former employees claiming unemployment benefits and how long your business has been contributing to the SUI pool. Depending on these variables, experienced employers in New York might see tax rates ranging from 2.1% to 9.9%.
That said, the duration for which your business is considered a new employer varies from state to state. Once you’ve shed your new employer status, you’ll move on to an experience-based tax rate.
How To Find SUI Rate by State
Figuring out your state unemployment insurance rate involves a few steps, especially because each state has its own procedures and specifics. Let’s break it down.
Register for a SUTA Tax Account
First and foremost, you’ll need to sign up for a State Unemployment Tax Act (SUTA) account in your respective state.
When registering, you must provide specific details about your business. The critical piece of information is your employer identification number (EIN).
Get Informed on Rates
After registering, your state will promptly inform you about your applicable SUI rate and the state-specific wage base.
Some states go the extra mile by categorizing new employer rates based on industry type — construction and non-construction, for instance. In Nebraska, the 2023 SUTA rate for new employers stands at 1.25%, while new construction employers are looking at a rate of 5.4%.
Stay Updated on Adjustments
Don’t get too comfortable with your initial rate. States usually reevaluate and update SUI rates. The timeline for these adjustments varies significantly from one state to another.
For instance, once you pass the new employer phase, your state will assign you an updated rate within a given range. For example — Alabama has a SUTA tax rate range of 0.65% to 6.8% for 2023.
What Are Some State-by-State SUI Rates?
As you learn more about SUI rates, here’s a primer on the rates in some of the most populated states.
New York Rate
In the Empire State, SUI tax rates run between 2.1% and 9.9%. That’s quite the range, but remember, it will be tailored to your business needs and experience.
The Golden State’s SUI rates vary from 1.5% to 6.2%. Unlike the price of real estate, you have a fair chance of landing on the lower end of the tax rate spectrum.
Everything may be bigger in Texas, but not necessarily the SUI rates. They range from a modest 0.23% to a more considerable 6.23%.
In the Sunshine State, your business could be looking at SUI rates from as low as 0.1% to as high as 5.4%.
Illinois comes into play with SUI rates that range from 0.850% to 8.650%. If you’re setting up shop in the Windy City or elsewhere in the state, keep these numbers in mind.
Here’s a quick snapshot of the SUI rate ranges in other states:
- Alaska: 1% to 5.4%
- Michigan: 0.06% to 10.3%
- Oklahoma: 0.3% to 9.2%
- Virginia: 0.13% to 6.23%
- Washington: 0% to 8.15%
As you can see from this quick coast-to-coast tour of SUI tax rates, the rates differ widely. That is why understanding your state-specific rate is crucial for planning and budgeting.
What If You Have Employees in Multiple States?
Managing remote employees across state lines? The last thing you need is to end up in a compliance bind. You need a tool that helps you manage SUI rates across states.
If you’re asking yourself which state gets your SUTA tax for employees who live across the country, Mosey has you covered.
- Quick and easy registration: Mosey automates the process of opening tax accounts, so you spend less time in back-and-forths with state agencies.
- Comprehensive compliance overview: From your HR and payroll obligations to your registration and tax requirements, Mosey shows it all in one neat dashboard. No more juggling multiple tabs and checklists.
- Identify compliance gaps: Mosey knows the rules, so you don’t have to. Notifications and legislation tracking let you know if you’re missing anything critical to stay compliant with state laws.
What’s the Difference Between FUTA and SUI?
FUTA, which stands for Federal Unemployment Tax Act, is a federal tax. SUI is a state tax. FUTA provides a safety net on a national level, while SUI customizes its unemployment assistance state by state.
Employers typically shell out for FUTA annually, while SUI is taxed more frequently. As we mentioned, quarterly payments are the norm.
What’s more, FUTA is a flat rate, currently sitting at 6.0%. Conversely, SUI uses a variable rate dependent on factors like your experience as an employer and the state’s specific wage base.
Stay Compliant With Mosey
The nuances of SUI don’t have to complicate your business endeavors. Whether it’s understanding rates by state or juggling payroll compliance in multiple states, Mosey offers a comprehensive solution tailored to simplify your tasks.
Explore Mosey today and put your SUI responsibilities on cruise control.
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