Reference: Minnesota Law, §268.051 Subd.2 (b)(d), §268.051 Subd.5, §268.051 Subd.5 (b), §268.051 Subd.8, and 116L.20
View unemployment insurance 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 on June 30th of the previous year. Unemployment insurance tax is only paid on 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 $8,000 in gross wages during each quarter of 2012. All wages paid during the first three quarters ($24,000) are taxable. In the fourth quarter, only the first $4,000 paid to the employee is taxable, because the taxable wage base of $28,000 for 2012 has been reached. The remaining $4,000 paid during the fourth quarter must be reported but 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 an employer was determined to be a successor to another Minnesota UI employer account, and the previous employer's employees continued their employment with the new employer, the new employer may count the wages paid to those employees toward their taxable wage base for the year the succession occurred. Reference the Experience Rating Successorship section of this handbook for more information on this process.
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 paid wages for a only short time is assigned a new employer tax rate. There are two possible tax rates for new employers, depending on their business type: a rate which is the computed average rate of all Minnesota employers or a rate which is the computed average rate of all Minnesota employers in high experience rating industries (defined below). The computed average rate is determined by the ratio of all unemployment benefits paid to all Minnesota applicants laid off by employers in the subject group to all of the taxable wages reported by Minnesota employers in the subject group, plus the base tax rate. Eventually, each employer receives an experience rating based on the unemployment benefits paid and taxable payroll reported on the employer's 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
- Road building, repair or resurfacing, including bridges, tunnels, and residential and commercial driveways and parking lots
Additional Assessment. When the balance in the Fund on March 31 is 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 that 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 9.40 percent (the maximum experience rating allowed under the Minnesota UI Law of 8.90 percent plus the maximum base rate of 0.50 percent). When all of the factors are combined (the experience rating , plus the base rate, assessments and fees), the total amount due will range from 0.6729 percent to 10.8696 percent of taxable wages for 2012.