Washington ESD federal unemployment tax rate - employer asking about my claim costs

oh wow that's way less than I thought it would be! My boss made it sound like my claim was going to cost him thousands

Yeah the federal part is pretty minimal. The state unemployment taxes that Washington ESD collects are what really varies based on the employer's claim history and industry.

Wait so there's federal AND state unemployment taxes? This is confusing

That makes more sense. He did mention something about their 'experience rating' whatever that means

Experience rating is basically how many unemployment claims the company has had. More claims = higher tax rates for that employer with Washington ESD.

Thanks, I needed to hear that. I do feel bad about it but you're right - I didn't choose to get laid off

Exactly! And that $42 max federal tax per employee is built into their business costs anyway

Interesting, I might need that if I have more questions about my claim. Getting through to Washington ESD on the phone is impossible

Is that legit? I'm always skeptical of third party services for government stuff

Yeah it's real, just helps you get connected faster instead of sitting on hold forever. Still talk to actual ESD staff.

Federal starts at 6% but almost all employers get a 5.4% credit, making the effective rate 0.6%. Washington has completely separate state unemployment taxes that fund the actual benefits.

OK so basically employers pay 0.6% federal plus whatever Washington ESD charges for state taxes?

Correct. The federal 0.6% goes to administrative costs. Washington ESD's state taxes fund the actual unemployment benefit payments.

So if my company is new that could explain why my boss is more worried about costs?

Exactly! New employers pay higher Washington ESD rates until they build up a track record. That's probably what's concerning your boss.

The idea is that it encourages job stability and makes sure the companies that use the unemployment system more help fund it more. But I see your point about economic downturns.

At least the federal rate doesn't change based on claims. It's the same 0.6% for everyone.

Perfect, that's exactly what I needed to know. I can tell my boss it's just $42 max per employee for the federal part.

Make sure he understands that your individual claim amount doesn't change that federal tax at all

Yeah I think he's confusing the federal and state parts. I'll try to explain the difference

What determines the Washington ESD rating exactly?

It's based on the ratio of unemployment benefits paid to former employees versus the total wages the company has paid over several years.

So basically if you have to lay people off a lot, your rate goes up with Washington ESD?

Right, companies that generate more unemployment claims pay higher state rates to Washington ESD. The federal rate stays the same regardless.

That's exactly why I mentioned Claimyr earlier - it really does help with getting through to actual Washington ESD representatives instead of sitting on hold forever.

I saw that but wasn't sure if it was worth trying. The Washington ESD phone system is just brutal

I used it last month when my weekly claim got stuck. Way better than the regular calling nightmare.

Got it. So he's probably worried about the Washington ESD state tax rates changing based on claims?

Exactly. Those can vary significantly and do increase with more unemployment claims from that employer.

Right? $42 maximum per employee seems like it should be a non-issue for any company with a real budget

Some small business owners just don't understand how the unemployment tax system works and panic over nothing

It's been stable at 0.6% (after the 5.4% credit) for many years. The base 6% rate could theoretically change but rarely does.

The credit can be reduced in some states but Washington isn't one of them currently

Yeah that seems to be the consensus here. I'll explain the difference to him tomorrow

Right? Makes me feel less guilty about filing when I see how the funding actually works

Same here. The federal part especially seems like just basic infrastructure cost

Good to hear another confirmation. The regular Washington ESD phone system is completely broken

I'll have to check out that video demo someone mentioned

Glad this thread helped you too! I feel much better about explaining it to my boss now

Perfect summary! Saving this comment to reference when I talk to my boss

This should be pinned at the top honestly