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An employer’s tax rate determines how much the employer pays in state Unemployment Insurance taxes. To calculate the amount of unemployment insurance tax payable, TWC multiplies their amount of taxable wages by the employer’s tax rate. The maximum amount of taxable wages per employee, per calendar year is set by statute and is currently $9,000.
Employers newly liable for state unemployment tax who do not acquire compensation experience from a previously liable employer begin with a predetermined tax rate set by the Texas Unemployment Compensation Act (TUCA). The North American Industry Classification System (NAICS) assigns an average tax rate for each industry. Texas law sets an employer’s tax rate at their NAICS industry average or 2.7 percent, whichever is higher.
Newly liable employers continue with the entry-level tax rate until they are chargeable throughout four full calendar quarters. Chargeable simply means that the employer could have been responsible for unemployment benefits paid to a former employee, it is not required that an unemployment claim be filed. In most cases an employer is not chargeable until their third quarter of paying wages. Employers must pay wages a minimum of six quarters to receive an experience rating.
Once a newly-liable employer completes four chargeable quarters, we assign an interim tax rate applicable for the duration of the calendar year. Interim tax rates are based on an employer’s:
After the completion of their first four chargeable quarters and any interim tax rate period, TWC assign’s an experience tax rate for the employer.
TWC calculates experience-rated employers’ tax rates as of October 1 to be effective for the following calendar year, and mails notices of the rates to employers in December. See Your 2016 Tax Rates for information regarding the components and calculation of your current tax rate.
The effective tax rate for experience-rated employers is the sum of five components. The amount of tax you pay is the sum of the five tax components multiplied by your taxable wages.
Unemployment tax rates vary year by year. For tax rate information for the last ten years, see the table below.
For details on how the current year tax rate was calculated, select the current year link in the table below.
|Year||Taxable Wage Base||Minimum Tax Rate||Maximum Tax Rate||Average Tax Rate||Average Experience Tax Rate|
An employer's tax rate experience is transferred to a successor employer when:
There is no provision in the law for voluntary total transfer of experience.
A partial transfer of experience is possible when:
The successor employer must acquire a distinct and separate part of the organization, trade, or business that is capable of operating independently and separately from the predecessor employer.
The wages attributable to the acquired part of the organization, trade or business must be separate and distinct from other wages of the predecessor employer and must be solely attributable to services provided on behalf of the acquired part of the organization, trade, or business. In order to make a partial transfer of compensation experience, complete and submit the Joint Application for Partial Transfer of Compensation Experience Forms.
It is unlawful for employers to avoid a higher unemployment tax rate by altering their experience rating through transferring business operations to a successor. This practice, known as State Unemployment Tax Act (SUTA) dumping, is a common scheme in which a business with a higher unemployment tax rate shuffles employees to another business in order to pay a lower rate. For more information, see State Unemployment Tax Act (SUTA) Dumping.
An employer’s General Tax Rate may be impacted by benefits paid to former employees and charged to the employer’s account.
The Voluntary Contribution Election is an option private employers can exercise to reduce their tax rate or maintain a lower tax rate by voluntarily paying all or part of the benefits paid to former employees rather than repaying the benefits through an increase in their unemployment tax rate. We include an application for voluntary contribution with the annual tax rate notice for accounts that have been charged with unemployment benefits affecting their rate.
For more information, see Voluntary Contribution Program.
A governmental employer's annual contribution rate is computed in accordance with Chapter 204, Subchapter F of the Texas Unemployment Compensation Act. Unemployment Insurance tax rates are computed for taxed government employers as a group. All taxed government employers have the same rate in a given year. Unemployment Insurance tax rates for taxed government employers are determined by how much the group has withdrawn from the Unemployment Compensation Trust Fund in benefit payments to their ex-employees as compared to the amount of taxes that the group has paid. These rates do not apply to government employers who have elected to be reimbursing employers rather than taxed employers. For more information, see Reimbursing Government Employers Option below.
The annual contribution rate is expressed as a percentage. The numerator is the amount of all benefits paid, less benefits paid and reimbursed from other sources. If the amount of benefits paid is greater than the contributions paid, the excess benefits paid are added. If the amount of benefits paid is less than the contributions paid, the excess contributions are deducted. The denominator is the amount of the total wages paid by employers in the group.
|Formula for Governmental Tax Rate Calculation||2016 Amounts|
|Benefits paid and charged to taxed political subdivisions||$8,889,437.36|
|- Contributions collected in excess of benefits paid (reduction to benefits paid)||$1,335,326.31|
|+ Benefits paid in excess of contributions collected (increase to benefits paid)||$7,554,111.05|
|Adjusted amount of benefits paid to all claimants of taxed political subdivisions for the year ended December 31st||$16,443,548.41|
|Total wages paid by all taxed political subdivisions for the year ended December 31st||$908,162,820.22|
The table below shows the history of governmental tax rates for the last ten years.
|Rate Year||Effective Tax Rate|
A government employer may elect to be a reimbursing employer and repay the Unemployment Compensation Trust Fund, dollar for dollar, for benefits paid to former employees. Chapter 205, Subchapter A of the Texas Unemployment Compensation Act (TUCA) authorizes a Political Subdivision to elect reimbursement to the unemployment compensation fund in lieu of paying unemployment taxes. To learn more about the reimbursing employer option, see Reimbursing & Government Employers.
You can get tax rate information and a detailed listing of the individuals making up the three-year total of benefit chargebacks used in your Benefit Ratio online or by phone, fax, email or postal mail,
Online: Unemployment Tax Services
Texas Workforce Commission
Tax Department-Status Section - Rates Unit
101 E. 15th St Rm 514
Austin, Texas 78778-0001
If you have a question about an individual chargeback claim, include your account number, the unemployment benefit claimant's Social Security number and the initial claim date, and send the request to:
Texas Workforce Commission
UI Support Services
101 E. 15th St Rm 354
Austin, Texas 78778-0001