The Virginia State Unemployment Insurance (SUI) tax rate varies from employer to employer. It can range from a minimum of 0.1% all the way to a maximum of 6.2%. This tax is paid for by the employer on the first $8,000 of wages per employee.
Why does this tax rate range?
The Virginia State Unemployment Insurance (SUI) is responsible for paying out unemployment benefits. When an employee is laid off or let go (for reasons that do not disqualify them from benefits) they can apply for such benefits through the Virginia Employment Commission (VEC).
When the former-employee contacts the VEC, they provide information on their former employer. The VEC then verifies the former-employee’s reason for separation with their former employer to determine eligibility.
If the former-employee is eligible for benefits and the VEC approves their claims, then the employer faces a benefit charge. The logic goes that since the employer caused someone to receive employment benefits they should foot some of the bill. So their SUI tax rate increases.
How do employers determine what their SUI tax rate is?
The VEC applies an “experience rating” to employers based on how they approve unemployment benefits.
- If an employer has frequent and higher unemployment benefit claims levied against them, then they have a poor experience rating. Meaning the VEC sees them as more of a liability, so they have to pay more into the state’s unemployment insurance.
- If an employer has few or no unemployment benefit claims levied against them, they have a higher experience rating. So they aren’t responsible for paying into unemployment insurance.
Remember, unemployment benefits are paid through an insurance system. The insurance system pools resources from the collective so no one entity is left solely responsible. However, it relies on advanced analytics to stay solvent. If members of that collective are responsible for more claims, then they are responsible for more benefits.
If the VEC did not apply experience ratings and vary the SUI tax rate, then the SUI would be unable to stay solvent.
What’s the practical benefits to a varied SUI tax rate?
The idea behind this system is to encourage workforce stability. It benefits employers who keep people employed while “punishing” those who cause layoffs. It is essentially holding employers responsible for who they let go.
What about new employers who don’t have an experience rating yet?
New employers are assigned the default rate of 2.5% plus any additional administrative fees. This default rate lasts until the VEC can determine a personalized experience rating.
How can employers find out what their SUI tax rate is?
Each employer’s SUI tax rate is determined annually. The VEC sends out annual notices by mail, saying their assigned SUI tax rate for the upcoming year. This formal notice also provides a record of unemployment benefits charged to them as an explanation of their rate.
Employers can also log in to their online VEC account to check their current tax rate.
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Disclaimer: This blog post is for informational purposes only and should not be construed as legal advice. Always consult the official resources and seek legal counsel if necessary for complete and accurate information regarding specific regulations and practices.
