We at Unemployment Solutions for You proudly offer our unemployment claims management services across the United States. We are a leader in our industry not only because we offer an outstanding product, but also because we have a deep knowledge-base in the many differing unemployment laws across the 50 states. Part of our mission is to also educate you about how these laws may differ from state to state because they can affect you directly. So, join us on our continuing series, in which we explore the differences in unemployment eligibility, tax rate ranges, base periods, and much more in each state. This month, in Your State’s Unemployment Tax Laws, we’ll be looking at Pennsylvania, the Keystone State.
The first step you should take as a new Pennsylvania business is to register with the Pennsylvania Department of Labor & Industry within 30 days of an employee performing services for which s/he would earn a wage. By establishing an unemployment insurance (UI) tax account with the state, either online or by paper, you will be on your way to lawfully complying with UI tax law.
Unlike many other states, Pennsylvania does not have a minimum wage amount that must be paid before an employer becomes liable for UI taxes. By simply having an employee, your business will need to begin the UI tax process.
When you are a new business and have begun to pay wages, there is a basic “new employer” contribution rate that you will be held to for your first two or three years. For non-construction employers, the basic contribution rate is 3.5% and 9.7% for construction employers. If a surcharge (additional rate element) is in effect, the new employer rate may be higher. This rate remained at 3.7030% from 2008 – 2012, but it has since decreased to 3.6785% for non-construction employers and 10.1947% for construction employers.
Once you are no longer eligible for the new employer tax rate, you will receive either a computed or standard tax rate, dependent on the employment experience your business has since it began.
If your business has exhibited a more sporadic employment history after new employer eligibility has expired, you will be assigned a standard rate. These rates can be adjusted dependent on your reserve ratio, or the measure of your business’ calculated risk for unemployment. For the years of 2013 to 2017, a positive reserve would earn employers a rate of 7.4254% and a negative reserve would yield a rate of 11.4192%.
As for the computed, or experience-based rate, there are a number of components that factor into how high or how low the tax rate may be. These components consist of the following six:
Reserve Ratio: the lifetime measure of the employer’s risk with unemployment.
Benefit Ratio: short-term comparison of the employer’s taxable payroll and UI charges.
State Adjustment: an equal assessment of all employers, levying the benefit costs paid by the state of Pennsylvania.
Surcharge Adjustment: an element in the contribution rate that is multiplied by the employer’s basic rate (2017: 5.1%)
Additional Contributions: a factor applicable to the overall contribution rate for all contributory employers (2017: 0.65%)
Interest: a factor added to the rate for the purpose of repaying funds to the Federal Government for Pennsylvania’s depleted UI fund (2017: 1.1%)
The Taxable Wage Base, or maximum annual amount that an employer can be taxed for an employee’s wages has been gradually increasing over the past few years, and is expected to reach $10,000 by 2018.
Unlike other states, Pennsylvania also requires that employers withhold employee contributions when wages are paid, and that they be collected in a trust fund to be remitted to the Department of Labor & Industry with filings of quarterly wages and tax information.
In the event that an employer fails or refuses to file registration documents, quarterly UC tax returns, and/or pay all contributions due through the second quarter of the year, a delinquency tax rate may be assessed at 3% higher than the rate that otherwise would have been assigned to an employer. However, such a price may be avoided with the right tools.
By speaking with someone who will ensure these processes are properly managed, you won’t have to pay more for missed deadlines or opportunities. Unemployment Solutions for You is dedicated to assisting you in achieving your best possible unemployment tax rate, as well as in managing your unemployment claims. For more information, please give us a call toll free at 800-928-5750.
In case you missed it, last month we covered the unemployment tax laws of Massachusetts. You can find last month’s blog here, and a few of the other states we’ve featured here.