What wages are subject to unemployment tax - Washington ESD question for my small business

All wages paid to employees are generally subject to Washington unemployment tax, including overtime and bonuses. The current taxable wage base for 2025 is $68,500 per employee per year. So you pay UI tax on the first $68,500 of wages for each worker.

Tips are tricky - if your employees report cash tips to you and you include them in payroll, then yes they're subject to UI tax. But if customers tip directly and employees don't report it through your payroll system, then it's not subject to your UI tax obligation.

I had similar questions when I started my construction business. Regular wages, overtime, bonuses, commissions, vacation pay, sick pay - all subject to UI tax up to the wage base. The Washington ESD website has a good employer handbook that breaks it down.

When I was struggling with Washington ESD employer questions like this, I found Claimyr really helpful. They have people who know the system inside and out - check out claimyr.com. They helped me get through to the right Washington ESD department without waiting on hold forever. There's a demo video at https://youtu.be/7DieNd3C7zQ that shows how it works.

Don't forget about fringe benefits too! If you provide things like company car use, lodging, or meals that aren't for the employer's convenience, those might be subject to UI tax as well.

The key thing to remember is that Washington unemployment tax is calculated quarterly. You'll file your quarterly report and pay based on total taxable wages for that quarter, up to the annual limit per employee.

ugh the whole employer side of unemployment is such a pain. at least when you're an employee you just see it come out of your check and don't have to think about it

One more thing - make sure you're registering for the right industry classification code when you set up your account. Different industries have different UI tax rates, and landscaping might fall under agriculture or construction depending on exactly what services you provide.

Been running my electrical business for 15 years and still sometimes get confused by this stuff. The wage base changes every year too - used to be much lower. Just keep good records of all wages paid and you'll be fine.

Pro tip: if you have seasonal employees, you still pay UI tax on their wages even if they only work part of the year. Don't make the mistake I did thinking seasonal workers were exempt.

Another thing to watch out for - if you pay employees in forms other than regular wages, like stock options or deferred compensation, there are special rules about whether those are subject to UI tax.

I actually used Claimyr when I had questions about my UI tax rate calculation. They connected me with someone at Washington ESD who could explain why my rate was higher than I expected. Saved me a lot of frustration trying to get through on my own.

Don't forget that if you're a sole proprietor with no employees, you don't pay UI tax at all. It's only when you have employees that you need to worry about this stuff.

The Washington ESD employer account system online is actually pretty good for tracking your quarterly filings and payments. Much better than it used to be a few years ago.

whatever you do, don't try to avoid paying UI tax by misclassifying employees as contractors. Washington is cracking down hard on that and the penalties are brutal

One last thing - keep track of when each employee starts working for you because there's a new hire reporting requirement too. It's separate from UI tax but part of your overall employer obligations.

This thread has been super helpful! I'm in a similar situation with my small contracting business. Thanks everyone for sharing your knowledge.

Just wanted to follow up on the Claimyr thing - I used them again last month when I had questions about experience rating and how it affects my UI tax rate. Really streamlined the process of getting specific answers from Washington ESD.

Bottom line for OP: virtually all wages you pay to employees are subject to UI tax up to the annual wage base. Keep good records, file quarterly, and don't stress too much about the details unless you have unusual situations.

This has been really educational. I'm bookmarking this thread for future reference as my business grows and I need to hire more people.

Just to add one more practical tip - when you're calculating your quarterly UI tax payments, make sure you're using the correct tax rate for your business. New employers start with a standard rate, but after you've been in business for a while, your rate can change based on your experience rating (how many former employees have filed claims). I learned this the hard way when my rate went up after a couple seasonal workers filed for unemployment during the off-season. It's all part of the system, but it's good to understand so you can budget accordingly.