Pennsylvania Announces Reduction in Unemployment Tax Rate

The Governor’s Office announced a reduction in the U.C. tax rate. Beginning Jan. 1, 2008, the average U.C. tax rate for businesses is projected to be 4.7 percent, down from 5 percent in this year and 5.4 percent in 2006.  The average employer cost for unemployment compensation per employee is projected to drop by $28. Benefit payments will continue without reduction for the second year in a row, and the tax rate on employee wages will drop from .09 percent to .06 percent.

Pennsylvania Unemployment tax rates apply to the first  $8,000 of wages. Rates depend on several factors. The "New Employer" rate applies to employers for up to the first 2 or three calendar years. The rate amount differs for nonconstruction and construction employers and ranges from  3.7520% to 10.3984%. The "Standard Rate" applies to employers with a sporadic contribution history so that they cannot get an Experienced Based Rate. The rate level depends on whether the employer has a positive or negative reserve account balance and ranges from 6.1888% to 10.2624%.

The Experienced Based Rate applies to all other employers. An employer’s experience based contribution rate is comprised of six components. The Computation Rate components are:

• Reserve Ratio Factor
• Benefit Ratio Factor
• State Adjustment Factor
• Surcharge Adjustment
• Additional Contributions Factor
• Interest Tax Factor