The big ($252M) tax increase for UI: How much more will my company pay?

Businesses in New Jersey will begin paying more for unemployment insurance in Fiscal Year 2022.

In total, companies will have to pay an approximate additional $252 million (and potentially billions more over three years) as the state begins the process of replenishing its unemployment insurance fund — which has made more than $28 billion in payments since the start of the pandemic.

Those are big numbers.

The question every business owner is asking is this: How much more will I have to pay?

The answer is not simple. It comes on a case-by-case basis.

The increase will not be based solely on the number of employees a company has, but also on how often the company has accessed the system in the past.

Companies that have a solid history of not laying off workers (think businesses with a stable business cycle) will fare better than those with a more cyclical business model (think businesses that need more employees during the summer than other months).

Figuring your unemployment insurance tax comes from two factors:

  • The column the state uses. States can be anywhere from Column A (the best) to Column E+10% (the worst). New Jersey had improved to Column B (pre-pandemic), but will now begin a three-year cycle where it will go down one column each year (this was done to gradually introduce the increase). New Jersey will move to Column C, then D, then E in the next three fiscal years.
  • The row your company is in: Each column has different rows, depending on how often your company accesses the system. It’s sometimes called the experience rating. Because of this, more stable companies pay less — because they used the UI fund less.

The (potential) good news for New Jersey employers: COVID-related furloughs or layoffs will not impact your row, thanks to a law passed by the Legislature. Wherever you were before the pandemic (good or bad) is where you stay.

The (potential) bad news for New Jersey employers: The success or struggles your company has had during the pandemic will not impact your row. Companies that have done poorly due to the pandemic will not get a better row. And companies that have done well will not have to pay more.

Here’s a chart that attempts to show the increase by column.