The Unemployment Insurance Contribution Rates Will Increase In 2024

Evmark Business Solutions

As the new year begins, California’s employers are facing yet another challenge in the form of increased unemployment insurance (UI) taxes. This comes as no surprise to these entrepreneurs and employers, who have been struggling to keep their businesses afloat amidst the ongoing COVID-19 pandemic.

Governor Gavin Newsom’s annual budget proposal, released on January 10, predicts a need for budget cuts in state government programs. However, it is the employers who are feeling the pinch the most. With higher interest rates, inflation, and now increased UI taxes, it seems like there is no end to the financial burdens faced by these businesses.

The Employment Development Department (EDD) of California notifies employers of their annual UI tax rates in December of the previous year. This means that employers were informed about their 2024 rates in December 2023. This year, the UI Fund debt, which has accumulated to approximately $20 billion due to the pandemic, is causing another increase in employers’ per-employee taxes. This debt will continue to cause an annual increase of $21 per employee until it is paid off.

For those who may not be familiar with the UI program, it is funded by employers through state and federal taxes on wages. The tax rates for employers are determined by various factors, including their history of terminating employees, the overall health of the UI fund, and the number of years the fund has been in debt. In 2023, the California Legislature considered a bill, SB 799, which would have allowed workers who chose to go on strike to claim unemployment benefits as if they were fired through no fault of their own. This would have added an estimated $215 million annually to the UI Fund debt and forced employers to essentially pay their workers to strike.

Fortunately, Governor Newsom vetoed SB 799, recognizing the strain it would have put on the UI Fund and the challenges employers are already facing. However, it is likely that more labor-supported UI tax-related legislation will be proposed in the future. Employers should be prepared for these potential changes and stay informed about any developments.

In summary, the new year brings new challenges for California’s employers, with increased UI taxes being just one of them. As the state continues to recover from the pandemic, it is important for employers to stay informed and prepared for any potential changes that may affect their businesses. 

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