Reference: Minnesota Law, §268.051 Subd.3 and §268.051 Subd.4
Experience rating assigns an unemployment insurance tax rate (experience rate) to employers who have paid covered wages for a sufficient period to rate their experience with unemployment insurance. The less unemployment that an employer's workers have experienced, the lower the unemployment insurance tax rate will be.
By relating tax rates to taxable wages and benefits paid charges, experience rating causes each employer to pay at a rate that covers the cost of the unemployment for which the employer is responsible. Experience rates are computed to the nearest one-hundredth of a percent, to a maximum of 8.90 percent.
The history of taxable wages and benefits paid charges assigned over a prior 48-month period is used to calculate an employer's experience rate. This is called the experience rating period. It ends on June 30 of the year prior to the year for which the experience rate is being computed. For example, experience rates assigned to employers for 2023 were based on the time period beginning July 1, 2018, and ending June 30, 2022.
Employers are not required to have had employees during the entire 48 month period to receive an experience rating. If an employer paid wages on or before July 1 of their first year of coverage, they will be eligible for an experience rating in the third year. For example, an employer that first paid wages on or before June 30, 2021, will receive an experience rating in 2023. In other words, to receive an experience rating, an employer must have paid wages for a minimum of 18 months.
Acquiring a business can affect an employer's unemployment insurance tax rate if they share 25 percent or more common ownership with the predecessor employer or there is substantially common management or control between the predecessor and successor employers. Common ownership includes ownership by a spouse, parent, grandparent, child, grandchild, brother, sister, aunt, uncle, niece, nephew, or first cousin, by birth or marriage. Common ownership is assumed if both the predecessor and successor are publicly held corporations.
If an employer acquires all or part of the organization, trade, business or assets of a predecessor and they share 25 percent or more common ownership with that predecessor or there is substantially common management or control between the predecessor and successor employers, the related factors in the predecessor's experience rating account (i.e. the benefits paid charges and taxable payroll associated with the percentage acquired) will automatically be transferred to the successor's account. The predecessor's taxable wages and benefits paid charges will be included when computing the successor's experience rate in future years.
If the successor acquires only a portion of the predecessor's business, only the related portion of the predecessor's taxable wages and benefits paid charges will be used to calculate the successors future tax rate(s). No transfer will occur without common ownership unless it is found that ownership was transferred to avoid an unfavorable tax rate.
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 website at www.uimn.org by clicking Employers & Agents, Help and Support, then the UI Law link.