Wisconsin Unemployment Insurance System Financing

What is the Unemployment Insurance program?
The Unemployment Insurance (UI) program provides weekly benefits to eligible unemployed workers. These benefits provide economic stability to workers and their families during temporary periods of unemployment and help lessen the effect of unemployment on the local economy. The program is financed solely through employer contributions (taxes). It is not operated as a part of the federal Social Security system, the state Worker's Compensation program or any federal or state welfare program.
What is the relationship between Wisconsin's Unemployment Insurance law and the Federal Unemployment Tax Act (FUTA)?
Unemployment Insurance is a federal-state program jointly financed through federal and state employer payroll taxes. The Federal Unemployment Tax is used, in part, to finance the administrative expenses of each state's unemployment insurance program and certain federal costs related to extended benefits. Employer payroll taxes collected under Wisconsin Unemployment Insurance law are used only to pay benefits to unemployed workers and to calculate tax rates.

How is your tax rate determined?

I. New Employer Rates:
As a newly subject employer, you are assigned a standard fixed rate for the first three calendar years of payroll. Newly subject employers in the construction industry pay at the average rate for all other experience-rated construction industry employers. New employer rates can be found at http://dwd.wisconsin.gov/ui/employers/taxrates.htm. After your first three calendar years of payroll, you will be assigned an "experience" rate based upon the activity in an account balance we maintain for you and the amount of payroll you report.
II. Employer's Account Balance (Reserve Fund Balance):
An individual account is maintained for each individual employer covered under Wisconsin UI law. The balance in this account is maintained for the purpose of determining your annual tax rate. The balance increases with a portion of each tax payment made by you and decreases with every unemployment benefit payment made to your laid off workers. You will receive a weekly statement when there is activity in your account. This statement shows all the increases and decreases to your account balance including detailed information regarding the benefit charges. The taxes paid are similar to insurance premiums, and in the event an employer goes out of business, no money in the Reserve Fund is ever returned to the employer.
III. Experience Rating:
After the initial new employer tax rating period, we determine your experience rate as follows:
  • Your Reserve Fund Balance as of June 30, which includes tax payments made through July 31 and benefit payments made through June 30.
  • Your Fiscal Year Taxable Payroll as reported on your quarterly reports for the fiscal year ending on June 30 of the current year. The fiscal year includes the last two quarters of the previous year and the first two quarters of the current year.
  • Your Reserve Fund Balance (RFB) is divided by your Fiscal Year Taxable Payroll (FYTP) to determine your Reserve Percentage (RP).

Formula Calculations: RFB ÷ FYTP = RP

The Reserve Percentage is then applied to the rate schedule. The rate schedule shows a basic rate, a solvency rate and a total rate.
  • The Basic Rate portion of each tax payment is credited to your reserve fund balance.
  • The Solvency Rate portion of each tax payment is credited to a shared risk account called the balancing account.
  • Your Total Rate is the sum of your basic rate and your solvency rate and is the rate shown on your quarterly tax report.
This Total Rate applies to all quarters for the following calendar year. You will normally receive your Annual Rate Notice in mid-October for the next calendar year. Form UCT-100B is the Rate Notice.
IV. Tax Rate Schedules:
The rate schedules can change from year to year depending on the overall condition of Wisconsin's Unemployment Reserve Fund. The cash balance in the Reserve Fund on June 30 each year determines which of the four statutory rate schedules is in effect for the following calendar year.

The rate schedule differs if you are considered a small or a large employer. If taxable payroll is $500,000.00 or more, the employer would be considered a large employer.

For more information, please visit our Handbook for Employers at http://dwd.wisconsin.gov/ui201

If you have questions, please contact our Employer Service Team at 608-261-6700 or taxnet@dwd.wisconsin.gov.


Publication Number UCT-17539-P  (R. 09/2014)

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