How do companies pay unemployment benefits - Washington ESD tax system explained

Washington ESD uses an experience rating system. Companies pay quarterly unemployment taxes based on their payroll and their "experience" with former employees filing UI claims. The more claims filed against your company, the higher your tax rate goes up to a maximum rate.

Every employer in Washington pays into the unemployment insurance trust fund through payroll taxes. It's not like workers comp where you're directly paying for your own claims - it's more pooled than that, but your company's claim history definitely affects your rate.

I work in HR and deal with this constantly. Washington ESD sends us quarterly wage reports and tax bills. The rate varies by industry too - construction companies pay way more than office jobs because of higher claim rates historically. If you need to reach Washington ESD about your company's tax account, I found this service called Claimyr (claimyr.com) that helps get through to actual agents. They have a demo video at https://youtu.be/7DieNd3C7zQ that shows how it works.

The system is pretty complex actually. New employers start at a standard rate, then after a few years Washington ESD calculates your individual rate based on your claim experience. Companies with no claims can get really low rates, while companies with lots of claims pay much higher rates.

My old boss used to contest every single unemployment claim, even the legitimate ones, because he said it saved money on taxes. Is that actually legal?

The unemployment tax is separate from regular payroll taxes like Social Security. It's calculated as a percentage of each employee's wages up to a certain wage base limit. For 2025 I think the wage base is around $70,000 per employee.

I'm confused - does the company pay for the entire unemployment benefit or just contribute to a fund?

Washington has some of the higher unemployment tax rates in the country, especially for industries like construction and hospitality. The good news is if you have low turnover and few claims, your rate can get pretty low over time.

Does anyone know if there's a minimum tax amount even if you have no employees file claims?

This explains why our unemployment tax bill was so high after we had to lay off 20 people last year. I had no idea it would affect future tax rates like that.

The quarterly reporting is a pain too. You have to report wages for every employee every quarter, even if nobody files for unemployment.

I think there's also a state workforce training tax that's separate from regular unemployment tax? Or am I mixing things up?

What happens if a company doesn't pay their unemployment taxes?

Is there a way to see what your company's current unemployment tax rate is?

The whole system seems designed to encourage companies to avoid layoffs and keep people employed, which makes sense from a policy perspective.

Does the tax rate reset if you sell your business or change ownership?

I'm surprised more business owners don't understand this system better. It can really impact your bottom line if you're not careful about how you handle separations.

Thanks everyone for explaining this. I feel like I understand the system much better now. Definitely going to be more strategic about how we handle workforce changes going forward.