State unemployment insurance tax rates (SUI)—also known as state unemployment tax (SUTA)—are part of the payroll taxes small business owners are responsible for funding. SUI gives short-term benefits to employees who lose their jobs due to a layoff, force reduction or other non-conduct-related reasons. Employees who quit their jobs or get fired for cause aren’t eligible for state unemployment benefits.
The SUI tax is a percentage of your employees’ wages, paid to the state where the work takes place. A small business owner with employees who work in different states will pay SUI tax to each state in which employees work.
SUI tax rates, tax rate ranges and unemployment tax wage bases vary by state and industry. Different states may also add surcharges and other fees.
For example, if a state mandates a wage base of $11,000, it means the small business owner is responsible for paying SUI taxes up to that $11,000; any wages an employee earns after that are exempt from SUI taxes. Like the Federal Unemployment Tax (FUTA), most states have SUI taxes as an employer only tax, meaning employees are not required to pay these taxes.
The SUI tax rate is different for each business. A company's SUI tax rate is determined by how many former employees file for unemployment. The more who file, the higher the rate. Unless separated for cause, it’s easy for an employee to receive unemployment benefits. Be sure to hold and document employee performance reviews, record employee job performance milestones—both favorable and unfavorable—and document any employee conduct violations to keep your SUI tax rate as low as possible. If you don’t already have a written code of conduct business policies, it’s time to consider adding an employee handbook. Streamline business management, save time, and support your compliance efforts with alerts and customized templates, guides and handbooks.
SUI is just one tax required to process employee payroll. A small business owner must also calculate and pay federal, state, and local payroll taxes, including Social Security, Medicare and FUTA—plus, prepare and file the appropriate tax forms.
Handling payroll in-house may appear to save money. In reality, it can be time-consuming, complicated, and fraught with compliance risks. Plus, the time you spend processing payroll diverts your attention from your business, customers, and employees. Learn more about SurePayroll small business and household employer automated payroll solutions.
This content is for educational purposes only, is not intended to provide specific legal advice, and should not be used as a substitute for the legal advice of a qualified attorney or other professional. The information may not reflect the most current legal developments, may be changed without notice and is not guaranteed to be complete, correct, or up to date
