The Language of Unemployment – Part One
One of the most frustrating parts of trying to control your unemployment insurance (UI) costs is trying to understand all of the rules and language of the various state unemployment agencies. After all, how can you expect to process claims, protest the ones that should not be paid, track and audit charges and credits, and ensure your UI tax rate is correct if you are not even sure you understand what your state UI agency is asking or saying?
This five-part series of blogs will provide you with some insight into the language of unemployment so that you can better understand how to manage this cost. We will begin by introducing some of the terms and concepts that you will find in the world of unemployment insurance – starting with those involving taxes and per-employee costs:
- FUTA – this acronym stands for the Federal Unemployment Tax Act. This law controls the federal laws surrounding the Unemployment Insurance system. It also is an acronym for the Federal Unemployment Tax employers pay each quarter.
- SUTA – this acronym stands for the State Unemployment Tax Act. Each state has their own set of state UI tax laws (and they can vary greatly from state to state). This is also an acronym for the State Unemployment Tax employers pay each quarter.
- State Unemployment Tax Rate – this is the rate that taxable employers are sent each year which tells them what their SUTA rate will be for that year. This is the rate at which each employee’s wages are taxed.
- Taxable Wage Base – this is the amount of wages an employer is taxed for each employee annually (although the payments are quarterly).
- Experience Rating – this is a method of calculating an employer’s UI tax rate based on their unemployment “experience” for the period used in the calculation. Experience ratings vary based on the employer’s experience with unemployment. It is rooted in the idea that the cost of unemployment compensation should be indexed to the amount of involuntary unemployment experienced by each company’s employees.
- State UI Reserve Account – the accounts into which employers pay State UI Taxes and out of which benefits paid to claimants are withdrawn. In many states, the amount of money in this account has a direct bearing on an employer’s State UI Tax Rate.
These were just a few of the terms and concepts used by the state UI agencies in their everyday business operations and communications. Having a better understanding of these should assist you in managing your unemployment claims, protests, and costs. Stay tuned for more in the upcoming parts of this blog. For more information about this topic and others, visit us on the web at UnemploymentTracker.com.