Do employees pay unemployment taxes for NYS Department of Labor benefits?
I'm looking at my latest paystub and trying to figure out all the deductions. I see state income tax, federal tax, social security, medicare... but I don't see anything specifically labeled as unemployment tax. My coworker said employees don't pay into unemployment insurance but that doesn't sound right to me? If we don't pay into it, how does NYS Department of Labor fund the unemployment benefits? Can someone explain how this actually works?
10 comments
Join the conversation
NeonNebula
Actually your coworker is correct! In New York, employees do NOT pay unemployment taxes. Only employers pay into the unemployment insurance system through payroll taxes. That's why you don't see any UI deduction on your paystub. The NYS Department of Labor collects these taxes from employers based on their payroll and claims history. So when you file for unemployment benefits, you're getting money that your employer (and previous employers) paid into the system on your behalf.
0 coins
Malik Thomas
•Wait that seems weird... so I never paid anything but I can still collect benefits? How much do employers actually pay for this?
0 coins
Isabella Costa
The employer pays both state unemployment tax (SUTA) to NYS Department of Labor and federal unemployment tax (FUTA). In NY the SUTA rate varies by employer but ranges from about 2.1% to 9.9% of wages up to a certain wage base. Most established companies with good experience ratings pay closer to the lower end. The FUTA rate is 6% but employers get a credit for paying state taxes so they usually end up paying 0.6% federal.
0 coins
Ravi Malhotra
•Wow I had no idea employers were paying that much! No wonder some companies try to fight unemployment claims.
0 coins
Freya Christensen
Yeah this confused me too when I first started working. I always thought it was like social security where both employee and employer contribute. But unemployment is 100% employer-funded. That's actually why some employers will challenge your unemployment claim if they think you quit voluntarily or were fired for misconduct - because successful claims can raise their future tax rates with NYS Department of Labor.
0 coins
Malik Thomas
•That makes sense! So there's actually an incentive for employers to contest claims even if they're legitimate?
0 coins
Freya Christensen
•Exactly, though most legitimate claims won't be successfully contested. But yeah it's all about their experience rating affecting future costs.
0 coins
Omar Farouk
just to add - there are actually a few states where employees DO pay into unemployment but NY is not one of them. i think its only like 3 states total including alaska and pennsylvania. so dont feel bad about not seeing it on your paystub, thats totally normal here!
0 coins
Chloe Davis
This system has always frustrated me because it creates this adversarial relationship between workers and employers when it comes to unemployment claims. Employers have a financial incentive to deny legitimate claims, which is why so many people have to go through the whole appeals process with NYS Department of Labor even when they clearly qualify. It would make more sense if employees contributed something too so employers wouldn't have such a strong motivation to fight every claim.
0 coins
NeonNebula
•I understand the frustration but there are good policy reasons why it's structured this way. It incentivizes employers to maintain stable employment and avoid unnecessary layoffs.
0 coins