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Unemployment Insurance provides temporary weekly benefits for workers who have lost their jobs due to no fault of their own and who are able to work, available for work, and actually seeking work in their usual occupations and who have earned sufficient base period wages from covered employers to qualify for benefits. This program is paid for by Louisiana employers through unemployment taxes paid on their employees’ payroll. Employees are not responsible for paying any contributions, so these amounts cannot be deducted from the employee’s wages. Each year, the Louisiana Workforce Commission (LWC) calculates the tax rates that employers must use in determining their unemployment taxes for the upcoming year. Several factors go into the calculation of an employer’s tax rate, including the employer’s taxable wages, taxes paid (contributions), and benefit charges against the employer through June 30th of the previous year. Employers pay unemployment taxes only on a portion of their employees’ wages; the amount of an employee’s payroll that is taxable is called the “wage base.” Like tax rates, the wage base is also determined by the state each year. The wage base can either be $8,500; $7,700; or $7,000 and is determined by how much money is in the state unemployment trust fund.
The wage base for 2020 is $7,700. So, employers will apply their tax rate assigned by the LWC to the first $7,700 of each employee’s wages. Once an employee’s wages exceed $7,700, the employer does not owe any unemployment tax on those wages.
Employers are taxed based on their type of business; the higher the unemployment rate in that type of business, the higher the tax. For example, a fast food restaurant with high turnover would be taxed at a higher rate than a law office with low turnover. The LWC announced in late November that unemployment insurance tax rates will be reduced in 2020 from the rates that were in force during 2019. Most employers will see a reduction in the tax rates they pay, although those employers at the max tax rate will not see a reduction in 2020. In early January, the state will be notifying Louisiana employers of their individual tax rates for 2020. The first payment of unemployment taxes will be for the first quarter of 2020 and will be due to the state by April 30th. As LSBA has previously reported, employers are now required to file their unemployment tax reports online.
For questions about unemployment taxes, please call the LSBA offices at 844-242-LSBA (5722) and ask for Lance.
Published: 01/07/2020
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