Employer taxes for 2021

Unemployment Insurance (UI)


• Determining your tax rates

 Legislative proposals could lower 2021 tax rates


Tax rate increases required by law due to high unemployment

The law requires the Employment Security Department (ESD) to base employer taxes on the amount of benefits paid out to their former employees who were laid off during last the four years

Federal UI benefits and taxes

In 2020, about two-thirds of more than $12 billion in paid benefits came from federal funds. This doesn’t affect employers’ state unemployment taxes.

State UI benefits and taxes

Still, we’ve paid around $4 billion in benefits from our state’s Unemployment Insurance (UI) Trust Fund, and this does affect employers’ state unemployment tax rates.

Based on current law, ESD projects employers pay $991 million more in 2021 

When comparing unemployment taxes paid in 2020, we expect employer’s responsibility to be $991 million more in 2021. This is a slight improvement from a $1.1 billion forecast in June.

Federal UI taxes
State UI taxes
  • The average experience tax rate for employers increases from 0.86% to 0.97% in 2021.
  • The flat social tax rate will increase from 0.25% in 2020 to the 1.22% ceiling in 2021.
Considerations
  • Employers aren’t responsible for fraudulent benefit charges.
  • Employers with a SharedWork plan and meeting weekly eligibility requirements have their enrolled employee's benefit charges removed under the federal CARES act. 
  • Due to new federal programs, some employers may receive a recalculated tax rate during 2021.


Details

Unemployment Insurance is a federal-state partnership 

Program parameters come from both federal statute and guidance and state statute and rules.
The federal government paid for many unemployment programs used during the pandemic in 2020 including:

  • Pandemic Unemployment Assistance
  • Pandemic Emergency Unemployment Compensation
  • Pandemic Unemployment Compensation (extra $600/week)
  • Lost Wages Assistance (extra $300/week)
  • Extended Benefits
  • Shared Work
  • First week of regular UI benefits

 

Every state has a UI trust fund

States deposit employer tax dollars in individual UI trust funds for paying future benefits.

  • ESD produces Washington’s UI trust fund forecast report three times per year.
  • Find current and archived reports on ESD's labor market page for the trust fund.

 

Employers pay two types of taxes: state (SUTA) and federal (FUTA)
  • SUTA taxes fund benefit payments for claimants. They’re deposited in the state’s UI trust fund.
  • FUTA taxes are administered at the federal level. They’re used for oversight of state unemployment programs. During times of high unemployment, states may borrow from FUTA funds, helping provide benefits to locally unemployed people.

 

State Unemployment Taxes (SUTA)

An employee’s wages are taxable up to an amount called the taxable wage base, authorized in RCW 50.24.010. This taxable wage base is $56,500 in 2021, increasing from $52,700 in 2020.

Experience tax currently capped at 5.4% (RCW 50.29.025)
  • Annual tax calculation based on the ratio of benefit claims of former employees charged to the employer and taxable wages reported by the employer over the preceding four fiscal years.
  • Employers are placed in one of 40 rate classes based on former employees’ use of UI program.
Social tax currently capped at 1.22% (RCW 50.29.025)
  • Shared-cost tax, based on costs from the previous year for benefit payments that can’t be attributed to specific employers.
  • State law instructs ESD to adjust the flat social tax rate based on the employer’s rate class.
Solvency tax currently capped at 0.20% (RCW 50.29.041)
  • State statute requires ESD to assess a solvency surcharge when the UI trust fund has less than seven months of benefits as of Sept. 30
  • The solvency surcharge will be the lowest possible rate needed to get the UI trust fund back up to nine months of benefits. ESD assesses the solvency tax for the following calendar year.

 

Federal Unemployment Taxes (FUTA)

Because Washington’s unemployment program conforms to federal law, state employers pay a FUTA tax of 0.6% on the first $7,000 of each employee’s wages. This is the same as last year.


Messaging to employers

Review insert included in this years tax rate notifications

Paid Leave premiums don’t change, wage cap increases

Paid Leave is a state program receiving funding through premiums paid by both employees and employers. Learn more on Paid Leave's website pages for employers.