Taxable Wage and Rate Information

Reference: Minnesota Law, §268.051 Subd.2 (b)(d) (2007), §268.051 Subd.5 (2007), §268.051 Subd.5 (b) (2007), §268.051 Subd.8 (2007), and §116L.20 (2007)

View unemployment insurance tax rates online at www.uimn.org, by clicking on Employer Information, then Tax Rates.

Taxable Wage Base. All wages for covered employment must be reported, but not all of those wages are taxable. Each year, a taxable wage base is set that is 60 percent of Minnesota's average annual wage. Unemployment insurance tax is paid on only the gross wages paid to each employee up to the taxable wage base for that year.

EXAMPLE: An employee works in Minnesota and is paid $7,000 in gross wages during each quarter of 2008. All wages paid during the first three quarters ($21,000) are taxable. In the fourth quarter, only $4,000 paid to the employee is taxable, because the taxable wage base of $25,000 for 2008 has been reached. The remaining $3,000 paid during the fourth quarter is not taxed for Minnesota Unemployment Insurance purposes.

Wages reported to another state for unemployment insurance tax purposes do not count toward the taxable wage base in Minnesota.

NOTE: If any person or organization acquires all of a Minnesota organization, trade, business and their predecessor's experience rating record is transferred to their employer account, during the year of acquisition, the successor may count the wages paid to the predecessor’s employees toward their taxable wage base for that year, if the predecessor’s employees continue employment with them. Reference the Experience Rating Successorship section of this handbook for more information.

Base Tax Rate. The base tax rate can range from 0.10 percent to 0.50 percent, and is determined each year by the amount in the Minnesota Unemployment Insurance Trust Fund (the Fund) on March 31 of the prior year. The base tax rate is intended to provide a financial reserve for periods of high unemployment, and to cover unemployment benefits paid from the Fund that cannot be directly recovered from a specific employer.

New Employer Tax Rate. An employer who has only paid wages for a short time is assigned a new employer tax rate. There are two possible tax rates for new employers, depending on their type of business - a rate which is the computed average rate of all employers or a rate which is assigned to employers in a “high experience rating industry”. The computed average rate of all employers is determined by the ratio of all unemployment benefits paid to Minnesota applicants to all wages reported by Minnesota employers, plus the base tax rate. Eventually, each employer receives an experience rating based on the unemployment benefits paid and taxable payroll in their own account.

High Experience Rating Industries. High experience rating industries are classified as those that have historically had a high amount of unemployment, these include:

• Residential, commercial or industrial construction, including general contractors,
• Sand, gravel or limestone mining,
• Manufacturing of concrete, concrete products or asphalt, and
• Road building, repair or resurfacing, including bridges, tunnels, and residential and commercial driveways and parking lots.

The employer tax rate for high experience rating industries is set by statute at 8 percent.

Additional Assessment. When the balance in the Fund on March 31 falls below certain levels, an assessment is added to the base tax rate for the following year to replenish the amount in the Fund.

Special Assessment for Interest on Federal Loan. Unemployment benefit payments are made from the state trust fund which is held in the federal treasury. When the state trust fund is depleted because of high payouts during a recession, the state trust fund borrows money from the federal unemployment trust fund. States must pay interest on the borrowed funds. The special assessment for interest on federal loan is used to pay the interest.

Workforce Development (Enhancement) Fee. This fee is collected and deposited in the Minnesota Workforce Development Fund. The Fund supports employment and training programs for workers who have permanently lost their jobs.

Computing Tax Rates
An experience rating is computed for each employer with covered employment by dividing 125 percent of the benefits paid to an employer’s former employees during the experience rating period by the total taxable payroll reported for the same period. The rating is computed to the nearest one-hundredth of a percent. Each December, employers are notified of their tax rates for the following year. The lowest tax rate that can be assigned is the base tax rate. The highest tax rate that can be assigned is 9.30 percent. When all of the factors are combined (tax rate, assessments and fees), the total amount due will range from 0.5560 percent to 10.7020 percent of taxable wages.

      

This handbook is based on current UI legislation; statements are intended for general information and do not have the effect of law. The Minnesota Unemployment Insurance Law - MN Statutes §268.001 to §268.23 and Administrative Rules 3310 and 3315 - can be accessed through our Web site at www.uimn.org; by clicking on the UI Law link.