Why do employers pay unemployment taxes - NYS Department of Labor requirements explained
I'm starting a small business in New York and trying to understand all the tax obligations. Can someone explain why employers have to pay unemployment taxes to NYS Department of Labor? Like what's the actual purpose and how does it work? I know I'll need to register but want to understand the system before I hire my first employee.
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Diego Vargas
Employers pay unemployment taxes to fund the unemployment insurance system that provides benefits to workers who lose their jobs through no fault of their own. In New York, you pay both federal (FUTA) and state unemployment taxes to NYS Department of Labor. The state tax rate depends on your experience rating - new employers typically start around 4.1% on the first $12,300 of each employee's wages in 2025. As your business builds a track record with fewer claims, your rate can go down.
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Chloe Harris
•That makes sense about funding the benefits. So if none of my employees ever file for unemployment, my rate would eventually go down?
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NeonNinja
Think of it like insurance - you're paying into a pool that covers unemployment benefits for all eligible workers in the state. When someone gets laid off or their hours are reduced, they can file a claim with NYS Department of Labor and receive weekly benefits. Your tax contributions help fund those payments. You'll need to file quarterly reports (Form NYS-45) and pay based on your total payroll.
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Anastasia Popov
•wait so even if my employees quit voluntarily I still have to pay the tax?
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NeonNinja
•Yes, you pay the tax regardless. But voluntary quits usually don't qualify for benefits, so they won't affect your experience rating negatively.
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Sean Murphy
Been dealing with this for years and honestly the paperwork is a pain but it's just part of doing business. NYS Department of Labor will send you everything you need once you register. Just make sure you keep good records of wages paid because they audit randomly and you don't want to mess around with that.
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Zara Khan
The system also helps stabilize the economy during downturns. When people lose jobs, they still have some income to spend on necessities, which keeps money flowing through local businesses. It's basically a safety net that benefits everyone, not just unemployed workers.
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