The Washington Hospitality Association’s State Government Affairs Team is working on a proposal that could lower unemployment insurance rates before the first payment is due at the end of April 2021.
If the team is able to get an unemployment insurance relief bill to the governor’s desk for signing by February, the Employment Security Department is expected to be able to implement the changes.
Here are some highlights of Senate Bill 5061:
- Non-charging benefits for all employers during the stay-home order, March 22–May 30, 2020
- 2021 rates are based on a 4-year, look-back period that ends June 30, 2020.
- Relieves benefit charges for 10 weeks under the stay-home order.
- No solvency surcharge until 2025 (0.2% savings)
- Caps the social tax rate
- Current social tax rate is 0.25%.
- The proposal will cap the tax at 0.5% in 2021, 0.75% in 2022, 0.8% in 2023, 0.85% in 2024 and 0.9% in 2025.
- Changes to the voluntary contribution plan
- Currently there is a program within unemployment insurance that allows an employer to “buy off” their experience rate charges at one time rather than incorporate the charges into their rates for 4 years. To be eligible, a business has to jump at least 12 rate classes and there are a few other restrictions and surcharges.
- Proposed changes in the bill will lower the number of increased rate classes for a business to be eligible to “buy down” its own rates.
- These changes are important because lawmakers could appropriate state or federal dollars to “buy down” rates, rather than having impacted businesses buy them down.
- Currently there is a program within unemployment insurance that allows an employer to “buy off” their experience rate charges at one time rather than incorporate the charges into their rates for 4 years. To be eligible, a business has to jump at least 12 rate classes and there are a few other restrictions and surcharges.
- Increases the minimum weekly benefit for claimants
- The current minimum weekly benefit is $201, which is a calculation of the average weekly wage.
- The proposal will increase the minimum benefit to 20% of the average weekly wage, or $270.
- This will be the highest minimum benefit in the country, and will cost the unemployment insurance system an estimated $150 million per year.
- The current minimum weekly benefit is $201, which is a calculation of the average weekly wage.
- Taxable wage base study
- The bill as proposed would not include an increase in the taxable wage base. But the Employment Security Department would need to study the impact this may have, and would report back to the legislature at a later date.
It is also important to note that current unemployment insurance taxes are paid on a portion of wages (similar to social security), and taxable wages do include tips. Washington state currently has the highest taxable wage base.
What should you do now?
Should you withhold payroll taxes based on your rate notices? Or should you withhold payroll taxes based or a lower amount hoping a bill passes? Each individual member will have to make that decision.
To understand what the bill as proposed would do for your unemployment insurance rates, you can recalculate your benefit ratio, which is a multi-step process:
- Re-estimate your benefit charges based on the six weeks of non-charging. If all of your charges for 2020 were coronavirus related and occurring after the stay-home order, then you can divide by 10/13ths (or if you have different facts you can apply them).
- Calculate your new total benefit charges by adding the reduced 2020 number into the 4-year, look-back period.
- Calculate your new benefit ratio by dividing total benefit charges by total taxable wages.
- Find your corresponding experience tax rate here: https://apps.leg.wa.gov/RCW/default.aspx?cite=50.29.025
