This week’s question comes from Rob, a business owner. I paid all my federal and state unemployment taxes and didn’t lay anyone off. Why is my unemployment rate going up? Answer: Generally, your state unemployment rate is determined by the ratio of your account balance to your covered employment wages for the measurement period.

For example, if the measurement period runs from October 1 to September 30, your account balance as of September 30 is the numerator and the taxable payroll during the year from October 1 to September 30 is the denominator. The resulting fraction is the reserve percentage or ratio. Some states use longer base periods or use an average over a period of years for the denominator.

The account balance generally increases by contributions the employer has paid into SUTA and decreases by benefit claims paid against the employer’s account and solvency assessments, if necessary. The solvency assessment is used to pay benefit claims that are not charged to an employer.

Taxable wages are generally wages paid to covered employees up to the SUTA limit. They should equal the wages on which SUTA taxes were calculated.

Many states use multiple schedules to determine the employer’s unemployment rate. The reserve percentage or ratio is located on the appropriate schedule and an unemployment tax rate it assigned. The higher the reserve percentage or ratio within the parameters of the schedule, the lower the unemployment rate for the upcoming year. Many states have moved to a schedule with higher overall rates for 2009 since their overall statewide reserve percentage or ratio is lower. Therefore, even employers with lower reserve percentages or ratios can have higher tax rates because of the higher rate schedule.

We recommend you forward Vision Payroll the notice with your 2009 rate as soon as you receive it. Contact Vision Payroll if you have any questions on the determination of your unemployment rate.