One of the biggest headaches for employers is their unemployment insurance tax rate. As tax rates continue to climb, employers are left with more questions than answers. When you’re short on time and tasked with many responsibilities, understanding UI tax rates can seem like a daunting task.

Is your UI tax rate keeping you up at night? Rest easy knowing you have the power to control it. Read on. Here’s what you need to know:

How are unemployment tax rates determined?

Employers pay both federal and state unemployment taxes. For 2016, the Federal Unemployment Tax (FUTA) rate is 6 percent. However, most employers do receive a 5.4 percent tax break by paying their taxes on time. Due to this break, the actual tax rate for FUTA is generally .6 percent. State unemployment insurance tax rates vary and are generally based on payroll and experience. Experience refers to how well you manage your UI claims and costs. States vary on how long an employer’s experience will affect unemployment tax rates.

Is my unemployment rate high or low?

The rate often depends on the industry, economy, location and a number of other factors. The important thing is to work on bringing the rate down. When an employer’s rate is reduced from 9 to 7 percent, or from 3 to 1 percent, the employer saves the same amount of money.

How do I lower my UI tax rate?

While state unemployment insurance tax rates are dependent on numerous variables, there is one surefire way a to lower your rate. Cost management software will cut UI costs for businesses of any size. Unemployment Tracker can help you audit and protest claims, understand and leverage the nuances of UI specific to your state, and catch costly errors. Trust me. You should look into leveraging this cloud-based system.

Interested in saving time and money on managing unemployment insurance? Here are some additional tips on how to take charge of your UI costs and break the cycle of rising tax rates.

Knowledge is power! Contact us today and let us work with you to address your unique UI needs.

What other questions do you have about your UI tax rate?