When learning about unemployment insurance, you've likely run into the acronyms FUTA and SUTA. They are frequently included in discussions about tax rates and the amounts a company has to pay into a fund. Respectively they stand for the Federal Unemployment Tax Act and State Unemployment Tax Act.

What is SUTA?

Like the name suggests, SUTA is a tax, but it isn't paid by the employee. This one the company covers and it, in turn, pays for unemployment insurance. Every state has their own program designed to have the taxes fund the UI payments and it accounts for some of what a worker can collect.

Originally started in 1939, SUTA helped combat the staggering amount of US citizens who were out of work and unable to find employment. Most payments occur quarterly with the accounting and payroll departments assigned with calculating the exact amount owed and paying it on time.

How is the tax rate determined?

Each state sets the exact parameters for determining the tax amount. The employers receive the amounts from the state, and it may vary each year. There are ways to both hurt and help your SUTA rate. High turnover, in particular, can cause rates to increase.

Who receives benefits from SUTA?

Because SUTA pays an unemployment insurance fund, all workers who leave a position at no fault of their own can collect. For example, if a worker is laid off or let go due to budget cuts and lack of work, they're able to receive UI. If an employee quits by their own choice or is fired for misconduct, they do not qualify. Additionally, they have to meet their state's requirements about employment type, length, etc., in order to receive payments.

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