For those folks that own their own business and haven’t resorted to many layoffs within the past few years, there is a bit of good news when it comes to unemployment tax rates for 2014. The Employment Security Department announced yesterday it’s expected that about 82% of employers in Washington will see the same or a lower unemployment tax rate for 2014.
In Washington, there are approximately 170,000 employers that are currently taxed. The 82% breakout includes about 29% of those employers seeing a lower rate and 53% will see the same rate as they did in 2013. The remaining 18% will see an increase based on the layoff history from the past four years.
These numbers are certainly improving for companies in our state compared to 2013 rates where only 14% of companies received a lower rate, 61% saw the same rate, and 25% saw an increase. In 2008, our state actually had the fourth highest average unemployment tax rate in the nation and in 2013, our state ranked 26 on that list.
For those that aren’t aware of how unemployment rate taxes work in our state, there are 40 rate classes that range from .14% up to 5.82%. Companies pay these rates and their employees do not contribute to the unemployment trust fund. Unemployment taxes are based mainly on a company’s layoff history, which means the more a company paid out in benefits, the higher the tax rate. In addition, these rates are instituted by state law and not by the Employment Security Department.
In 2014, companies can expect that unemployment taxes will be calculated on the first $41,300 of each of their employee’s earnings. This means that companies will see a decrease of about six dollars (down to $467) in the average tax they pay for each employee. However, each company’s actual bill is dependent on the total payroll and rate class.
While it’s mainly good news for the majority of companies in Washington, for those folks that are operating a company that will see an increase, it becomes even more important in the future to plan the workforce accordingly to avoid layoffs and an increase in unemployment costs.