This is the eighth post in the Employment Tax Law series. This series is dedicated to presenting individuals, sole proprietorships, and small to large businesses with a basic understanding of employment taxes, including the risks and responsibilities associated with those taxes.
For the first 48 months of paying wages, the MDEED will assign the new employer a tax rate. The new employer rate will either be an average of the tax rate for all employers in Minnesota, or, if the employer is in a high tax rate industry, the MDEED assigns the new employer the average tax rate for all employers in the high tax rate industry.
After paying SUTA tax for 48 months, each employer is assigned an experience rating, which is an individual tax rate for that specific employer. The experience rating, or tax rate, is based on the employer’s unemployment insurance claim history. An employer’s experience rating will usually fluctuate from year to year. The MDEED notifies employers in December of their employer’s experience rating for the next calendar year.
Any employer that has been assigned an experience rating can buy-down its experience rating. The buy-down payment must be made within 120 days from the beginning of the calendar year for which the tax rate is effective and will include a surcharge of 25%. The MDEED’s website has a forecast tax calculator and process tax rate buy-down program for determining whether a buy-down is cost effective.