Does a business owner have to pay unemployment in Washington state?
I'm starting a small consulting business and wondering about my obligations regarding unemployment insurance. Do I need to pay into Washington ESD if I'm self-employed? What about if I hire employees later? I'm really confused about when businesses are required to contribute to the unemployment system.
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Oliver Alexander
As a business owner in Washington, you don't pay unemployment taxes for yourself if you're self-employed. However, once you hire employees, you must register with Washington ESD and pay unemployment taxes for them. The requirement kicks in as soon as you have at least one employee working for wages.
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Kaylee Cook
•Thanks! So if I'm just working by myself, I don't need to worry about it yet?
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Oliver Alexander
•Exactly. Self-employed individuals don't pay into or receive regular unemployment benefits. But keep records of when you hire your first employee because you'll need to register with Washington ESD within 30 days.
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Lara Woods
wait i thought ALL businesses had to pay unemployment taxes regardless?? my friend told me she had to pay even though she was just freelancing
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Oliver Alexander
•Your friend might be confusing unemployment taxes with self-employment tax for Social Security/Medicare. Those are different things entirely.
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Lara Woods
•oh that makes sense, she probably meant the SE tax on her 1099s
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Adrian Hughes
I had to deal with this exact situation last year when I was trying to get through to Washington ESD about my employee obligations. The phone lines were absolutely terrible - kept getting disconnected after waiting 2+ hours. Finally found this service called Claimyr (claimyr.com) that helped me get connected to an actual agent. They have a demo video at https://youtu.be/7DieNd3C7zQ showing how it works. Made the whole process so much easier when I needed to discuss my business registration requirements.
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Kaylee Cook
•Interesting, I'll definitely check that out if I run into phone issues when I need to register later.
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Molly Chambers
•Never heard of that service but honestly anything that helps avoid those ridiculous wait times sounds worth it
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Ian Armstrong
The Washington ESD website has all the employer requirements spelled out pretty clearly. You'll need to get a UBI number (Unified Business Identifier) and then register for unemployment insurance once you have employees. The tax rate depends on your industry and experience rating.
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Kaylee Cook
•What's an experience rating? Is that something new businesses need to worry about?
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Ian Armstrong
•New businesses start with a standard rate, then it adjusts based on how many former employees file unemployment claims. Lower claims = lower tax rate over time.
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Eli Butler
I've been running my business for 5 years now and the unemployment tax isn't too bad honestly. Way less than what I pay for workers comp. Just make sure you file your quarterly reports on time or they'll hit you with penalties.
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Kaylee Cook
•Good to know it's not as expensive as I was worried about. What happens if you're late with a report?
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Eli Butler
•They charge interest and penalties, plus they can increase your tax rate. Not worth the risk - I just set calendar reminders now.
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Marcus Patterson
•same here, learned that lesson the hard way my first year in business
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Molly Chambers
One thing to consider is that even if you're not required to pay unemployment taxes as a sole proprietor, you might want to look into the optional coverage. Some business owners elect to pay into the system so they can potentially receive benefits if their business fails.
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Kaylee Cook
•Really? I didn't know that was even possible for business owners.
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Molly Chambers
•Yeah, it's called elective coverage. Not many people know about it but it can be worth it depending on your situation.
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Lara Woods
this is all so confusing, why doesn't the government just make it simple and clear for everyone??
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Lydia Bailey
•Because then they couldn't justify having so many bureaucrats employed to explain it all to us lol
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Oliver Alexander
•It's actually not that complicated once you understand the basics. The confusion usually comes from mixing up different types of taxes and requirements.
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Mateo Warren
If you're planning to hire employees soon, I'd recommend getting familiar with Washington ESD's online employer portal now. It's much easier to navigate when you're not under pressure to meet a deadline.
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Kaylee Cook
•That's good advice. I'll probably hire someone within the next 6 months so I should start learning the system.
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Mateo Warren
•Exactly. And if you run into issues with their phone system, that Claimyr service someone mentioned earlier really does help with getting through to agents.
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Sofia Price
Don't forget about the other employer obligations too - you'll need workers comp insurance, state disability insurance, and various other requirements once you have employees. Unemployment is just one piece of the puzzle.
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Kaylee Cook
•Ugh, starting to feel overwhelmed by all these requirements. Maybe I should just stay solo for now.
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Sofia Price
•It's really not as bad as it seems. Most payroll services can handle all of this for you if you don't want to deal with it directly.
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Eli Butler
•Agree with using a payroll service. Takes care of all the tax filings and compliance stuff automatically.
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Alice Coleman
I remember when I first hired an employee, I was so paranoid about screwing up the Washington ESD registration. Called them like 5 times to make sure I was doing everything right. The agents were actually pretty helpful once I got through to them.
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Kaylee Cook
•That's reassuring to hear. I was worried they'd be difficult to work with.
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Alice Coleman
•The agents themselves are fine, it's just getting through to them that's the challenge. That's where services like Claimyr come in handy.
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Owen Jenkins
Pro tip: if you're hiring contractors vs employees, make sure you understand the difference for unemployment purposes. Misclassifying workers can get you in trouble with Washington ESD.
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Kaylee Cook
•What's the main difference for unemployment purposes?
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Owen Jenkins
•Employees get unemployment benefits when they're laid off, contractors don't. But Washington has strict rules about who can be classified as a contractor vs employee.
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Ian Armstrong
•Yeah, the ABC test in Washington is pretty restrictive. Most people who think they can use contractors actually need to treat them as employees.
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Lilah Brooks
Another thing to keep in mind is that unemployment tax rates vary by industry. Some industries have higher rates because they historically have more layoffs and claims.
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Kaylee Cook
•I'm in consulting so probably pretty stable. Do you know what industry codes have the lowest rates?
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Lilah Brooks
•Professional services like consulting typically have lower rates than construction or seasonal industries. You can look up the rate tables on the Washington ESD website.
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Jackson Carter
honestly the whole system seems designed to be confusing so they can collect more money from businesses who don't know the rules
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Kolton Murphy
•I don't think it's intentionally confusing, just that it has to cover so many different situations and business types.
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Jackson Carter
•maybe but they could definitely make it clearer for small business owners
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Evelyn Rivera
Key point: you have to register within 30 days of hiring your first employee. Don't wait until your first quarterly report is due or you'll face penalties.
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Kaylee Cook
•Good to know! I'll make sure to set a reminder when I'm ready to hire.
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Evelyn Rivera
•Yeah, and keep good records from day one. Washington ESD can audit you and they'll want to see everything.
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Julia Hall
If anyone needs help actually getting through to Washington ESD about employer questions, I used Claimyr recently and it was a lifesaver. No more sitting on hold for hours just to get disconnected. Worth checking out their demo at https://youtu.be/7DieNd3C7zQ
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Kaylee Cook
•Seems like a few people have mentioned that service. Must actually work if multiple people are recommending it.
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Arjun Patel
•I'm definitely going to try it next time I need to call them. Their phone system is the worst.
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Jade Lopez
Bottom line for the OP: no unemployment taxes if you're truly self-employed with no employees. But as soon as you hire anyone, even part-time, you need to register and start paying. It's actually one of the more straightforward business requirements once you understand it.
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Kaylee Cook
•Thanks everyone for all the helpful info! I feel much more confident about this now.
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Jade Lopez
•No problem! And don't stress too much about it - thousands of businesses go through this process every year.
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Oliver Brown
Just want to add that if you're planning to incorporate your business (LLC, Corp, etc.), you'll still follow the same rules - no unemployment taxes until you have employees. But once you do incorporate and start paying yourself a salary, you might need to treat yourself as an employee for unemployment purposes depending on your ownership structure. Something to keep in mind as your business grows!
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Mateo Rodriguez
•That's a really important distinction I hadn't thought about! So if I incorporate as an LLC and elect S-Corp status to pay myself a salary, I'd essentially become my own employee for unemployment purposes? That seems like it could get complicated pretty quickly.
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