Most employers’ tax rates are based on the amount of benefits paid to their former employees. Lower rates are assigned to employers whose unemployment “experience” costs are low, and higher rates to those whose “experience” costs are high. This is called an “experience rating” system.

However, since new businesses have no experience of employees drawing benefits, they are assigned a rate equal to the average rate for all other employers in their industry. This industry average tax rate stays in effect for the first year and an additional three calendar years, at which time it is recalculated for the following year based on the employers’ experience with their workers drawing UI.

Each November, tax rates for the next calendar year are computed for all covered employers and tax rate notices are sent to the employers. Factors which affect the rates include:

• The length of time an employer has had employees.
• The employer’s timeliness record for submitting tax reports and making payments.
• The ratio of the total benefits paid out, to the employer’s former employees that have been “charged” to the employer’s account, to the employer’s taxable payrolls for the last four years. An employer can also be granted “relief of charges” for a variety of reasons.
• How much money is left in the account from which benefits are paid (the UI Trust fund balance).
• How the employer’s unemployment experience relates to those of other employers for a corresponding period.