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Unemployment Insurance Handbook for Employers (UCB-201-P)
Section 2 - Tax
Effective January 1, 2011, the definition of employee was amended for private sector employers other than nonprofits and trucking and logging operators. This definition is used to determine which individuals who provide services for them need to be included in the Unemployment insurance program. In other words, it determines when an individual's risk of unemployment belongs with an employing unit rather than with an individual who bears the risk of his or her own unemployment. The latter is known as an independent contractor. The amendment was made to clarify the test used to determine if an individual providing services is an employee or an independent contractor under the Unemployment Insurance Law. See the definitions of employee below for services performed both before and after January 1, 2011 under Other Private Sector Employers.
Penalties for misclassification of workers:
Wisconsin's Unemployment Insurance Law defines the term "employee" differently for individuals who provide services in the trucking or logging industry and individuals working for government units and nonprofit organizations from individuals working in other industries.
An individual working as a logger or trucker or providing services to a government unit or nonprofit organization will be considered an employee unless:
Unless both of the above conditions are met, the logger, trucker or individual providing services to a government unit or nonprofit organization is an employee and not an independent contractor.
This definition first applies with respect to services performed after December 31, 2010. The employing unit must satisfy the department that the individual by contract and in fact performs services free from control or direction by the employing unit. In making this determination, the following nonexclusive factors may be considered:
In addition to providing services free from direction and control, the individual must meet six or more of the following conditions:
The following definition applies with respect to services performed prior to January 1, 2011. An individual must satisfy at least 7 of the following 10 criteria to be considered an independent contractor:
The individual must operate under contracts to perform specific services for specific amounts of money and under which the individual controls the means and method of performing the services. An agreement between the worker and the employing unit is a contract, whether that agreement is oral, written, or limited to the practices followed.
An employing unit may direct what should be done by an independent contractor, but the individual should determine how to accomplish the job.
Under current law, it is incumbent on the employing unit to satisfy the department that the applicable conditions are met in order to consider the worker an independent contractor. The department will work with both the employing unit and the individual to gather the necessary information. However, it is ultimately the employing units responsibility to respond to the department.
If you have questions regarding the independent contractor provisions of the law:
Individuals who meet the statutory definition of employee but who perform certain types of services are specifically listed or designated as not performing covered employment. The result is that their wages are not reportable/taxable (unless they are taxable under FUTA*) nor will they be entitled to receive UI benefits based on those wages. The following excluded employment is grouped by types of employers that are entitled to the exclusion for UI tax purposes:
The employment exclusions that follow are optional. You must make an election to exclude this employment and must meet the specified criteria before the election will be approved.
Section 108.02(15)(L) allows small employers to elect to exclude the wages of all principal corporate officers provided that they have a direct or indirect ownership interest in the corporation.
The result is that you are not required to report the wages or pay state UI taxes on the wages of corporate officers who own or control 25% or more of the business. These excluded officers will not be entitled to draw UI benefits.
Criteria which must be met:
To help determine if a savings will be realized, please use Form UCT-8055.
Employers who have elected to exclude their principal corporate officer wages can rescind the exclusion (reelect coverage) if they determine the exclusion no longer benefits them. Employers must notify the department before March 31 of the year they wish to reelect coverage of corporate officers (Form UCT-17927-E).
Wisconsin law allows employers to exclude principal officers and reelect coverage of those officers only once. Therefore, future elections to exclude principal officers will not be approved.
For further information, please contact us at:
Certain employers may elect to be designated as Seasonal Employers. Ultimately, this could result in a lower tax rate. Seasonal employees may not be eligible to collect UI benefits, but wages would still be reported and taxes would continue to be paid on these wages. As a seasonal employer, you would also pay an additional 2% solvency tax on all of your taxable payroll for the calendar year, to a limit of the maximum rate in effect for the calendar year.
Criteria which must be met:
When designated as a Seasonal Employer:
The employment IS excluded (for benefit purposes) and no benefits are allowed IF:
Charging of UI Benefits:
**To obtain an election forms or for further information, please contact us at:
Work for an employer may be covered for UI tax purposes even though it is excluded for benefit purposes (e.g., work for designated seasonal employers). However, work excluded for tax purposes is generally excluded for benefit purposes. (Refer to the chart, Employment that is Excluded for Benefit Purposes, in Section 1, Part 7 for a summary comparison.)
Updated: March 31, 2023
Content Contact: UI Tax