Expert Articles

Employer Obligations Under the Mass Unemployment Law

Laurie Drago

Director of Tax Compliance

BizChecks Payroll

 

This time of year we are inundated with questions about unemployment insurance from our clients. These questions are primarily the result of an increasingly bad habit that the State of Massachusetts has developed. Unfortunately, over the past few years the Division of Unemployment Assistance (DUA) has begun publishing the unemployment rate for individual companies at the end of March or even the beginning of April. As the tax is retroactive to January 1st, many businesses are left with a large unemployment liability which must be funded by April 30th. A few of the most common questions:

Who is covered by the law?

The Massachusetts Unemployment Law (Chapter 151A for the General Laws of the Commonwealth) mandates that employers who pay more $1500 in wages in a calendar quarter or employ any individual for one or more days in each of 13 weeks during a calendar year are liable for contributions. The weeks of employment do not have to be consecutive and the employees do not have to be the same.

When do businesses become subject to the law?

Employers must file an Employer Status Report as soon as they begin doing business. 

What is an experience rating?

The DUA uses a system of credits and debits to determine the balance in an employer’s account. Quarterly contributions are credited to the employer’s account while unemployment benefits paid to former employees are debited to the company’s account. At the end of the third quarter each year, the DUA balances every employer’s account and uses this balance to calculate the next year’s unemployment rate.

How are individual business rates determined?

The DUA maintains an account for each enrolled employer. UI taxes paid by the business are credited to the account and benefits paid to former employees are debited against the account. The net balance of the account is divided by the total taxable wages paid out to determine the company’s reserve percentage. This reserve percentage determines the tax rate for the following year.

How are new business rates determined?

The current new business UI tax rate for non-construction employers is 2.83% of the first $14,000 in wages per employee. The current new construction employer rate is 9.49% of the first $14,000 in wages per employee. Massachusetts employers also pay a tax of .06% of the first $14,000 in wages per employee to fund the Workforce Training Program which awards matching grants to employers to provide training for incumbent workers.

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