How is the Contribution Rate Calculated?

New Utah employers are assigned a rate based upon the average rates of all employers in their respective industries. An "earned" rate based upon payroll and benefit experience is assigned January 1st of the year following their first full fiscal year (July 1st through June 30th) of reporting.

The unemployment insurance contribution "earned" rate for rated or qualified Utah employers is determined from the experience each employer has accumulated over previous years of coverage in the Unemployment Insurance Program. Utah’s law calls for a "benefit ratio" to be determined for each qualifying employer. This means that unemployment insurance benefits paid to your former employees will be used as the primary factor in calculating your contribution rate. These payments are known as benefit costs.

Benefit costs for your former employees will be charged to you in the same proportion as the wages paid by you in the claimant’s base period bear to the total wages of all employers of the individual worker in his base period. For example, if 50% of your former employee’s earnings during his base period year have been paid by you, then 50% of the unemployment benefits paid to this former employee would be charged to your account.

When an individual files a claim for unemployment benefits, all base period employers are notified that a claim has been filed (on Form 606, Employer Notice of Claim Filed) and informed of the potential benefit costs which may be charged against them. Any protest of a claimant’s eligibility for benefits or request for relief of benefit charges based on the reason for separation of the employee must be made at this time. Relief will not be granted if you do not protest when first notified by Form 606.

As benefits are actually paid, you will receive a quarterly Form 66, "Statement of Unemployment Benefit Costs." Your benefit costs for as much as the last four fiscal years (July 1st through June 30th), will be used in the computation of your contribution rate for the following calendar year. If the benefit costs charged to your account are inconsistent with a prior decision or action which was or should have been taken by the Department, you may request that corrections be made. The request must be filed in writing within 30 days of the date the quarterly statement is mailed.

Your overall contribution (tax) rate will be determined for each year by the following four factors:

  1. Benefit Ratio (basic tax rate): This rate is determined by dividing total benefits paid to your former employees by the total taxable wages reported to this Department by you during the same period of time. The last four completed fiscal years will be used in determining the contribution (tax) rate. New employers are assigned a basic contribution rate equivalent to the two-year average benefit cost ratio of their major industry. (See Exhibit 1, "Figuring Employer Basic Tax Rate.")
  2. Reserve Factor: This is an adjustment to the basic tax rate (an increase or decrease) which is necessary to maintain an adequate reserve in the Utah Unemployment Compensation Fund.
  3. Social Tax Rate: This rate is determined from the benefit costs which cannot be allocated to any particular employer. This rate is recalculated each year and added to the contribution (tax) rate for all employers. Here are some examples of benefit costs which are considered to be social costs:
    1. Benefit costs of employers who have gone out of business with no successor.
    2. The state’s share (50%) of benefit costs which result from the payment of federal extended benefits paid during periods of high unemployment.
    3. An employer’s benefit costs which exceed the maximum contribution (tax) rate of 8%.
    4. Benefit costs from which employers have been granted relief.

    5. Uncollectible benefit overpayments.

The overall tax rate is calculated as follows:

Benefit Costs
Total Taxable Wages		 x Reserve
Factor		 + Social
Tax		 = Overall
Tax Rate

(See Exhibit 1)

The employer contribution rates are calculated early in December for the following calendar year after all benefit and social cost data have been finalized. You will be notified in writing at the time as to your assigned rate for the coming calendar year and be advised of the factors used in determining your rate.

Rate Surcharge for Delinquent Payments: The Act provides for a surcharge of 1% of the taxable wages in addition to the overall tax rate for employers who have not paid all contributions for the fiscal year (July 1st through June 30th) prior to the January 1st computation date.

The surcharge will be removed in the quarter in which all delinquent contributions for the prior fiscal year (July 1st through June 30th) have been paid.