We get it: You have a lot of business-related questions during this time of coronavirus uncertainty. We’re here for you. As often as we can, we’ll provide a question (and answers from experts) on pressing issues for New Jersey’s businesses.
Today’s question: Will unemployment insurance tax rates go up if there are severe job cuts?
Charles Bruder, Norris McLaughlin
The effect of COVID-19-related employment terminations upon New Jersey state unemployment insurance tax rates will depend upon several interrelated factors — the total number of displaced employees, the duration of benefits claims, the capacity of the economy to rebound from current conditions and the availability of federal financial assistance.
Based upon current expectations, New Jersey employers should account for increased unemployment tax costs in their financial forecasting. While such tax rate increases may not be immediate, state unemployment tax rates likely will need to increase to offset significant benefits claims, once business activities in the Garden State approach pre-pandemic levels.
Charles Bruder is a member at Norris McLaughlin. Contact him at 908-252-4165 or firstname.lastname@example.org.
Charles Yuen, Scarinci Hollenbeck
For employers, absolutely.
Employer unemployment insurance tax rates are set based upon reserve fund balances. Since reserves will become depleted by an expected huge increase in claims, employer rates for future years will certainly rise. In New Jersey, employees also pay a percentage of income as a UI tax. In light of the expected fund depletion, employee rates could increase. They do not increase automatically by an experience-driven formula, so we cannot say for sure.
Charles Yuen is an insurance recovery and liability attorney at Scarinci Hollenbeck. Contact him at 201-896-4100 or email@example.com.
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