SUI Tax Rates Explained: A Complete Guide to State Unemployment Insurance for Employers

Every business owner who hires employees faces a hidden cost that can significantly impact their bottom line: state unemployment insurance (SUI) taxes. While most entrepreneurs focus on federal taxes and payroll obligations, SUI rates quietly eat into profits, with rates ranging from nearly 0% to over 12% depending on your state and business history.

Understanding how SUI works, what determines your rate, and how to legally minimize your tax burden can save your business thousands of dollars annually. This guide breaks down everything employers need to know about SUI taxes in 2026.

What Is SUI Tax?

State Unemployment Insurance (SUI), also called State Unemployment Tax Act (SUTA), is a mandatory payroll tax that employers pay to fund their state's unemployment benefits program. When workers lose their jobs through no fault of their own, they can file for unemployment benefits, which are paid from this fund.

Unlike income tax or Social Security, SUI is primarily an employer-only tax in most states. You do not withhold this tax from employee wages. However, three states require employee contributions as well:

• Alaska
• New Jersey
• Pennsylvania

In these states, you'll need to withhold a portion of the SUI tax from employee paychecks in addition to paying the employer portion.

How SUI Tax Rates Are Determined

Your SUI rate isn't random. It's calculated based on several factors that vary by state:

1. New Employer Rate

When you first register as an employer, your state assigns a standard rate for new businesses. This rate varies significantly by state and sometimes by industry. For example:

• California: 3.4% for new employers
• Florida: 2.7% for new employers
• Pennsylvania: 3.822% for non-construction, 10.5924% for construction
• Nebraska: 1.25% for most industries, 5.4% for construction

2. Experience Rating

After you've been in business for a qualifying period (typically 2-3 years), your state calculates an experience rating based on your unemployment claims history. The formula most states use is the reserve ratio method:

Reserve Ratio = Employer Account Balance / Average Taxable Payroll (3 years)

If your former employees have filed many unemployment claims, your reserve ratio drops, and your rate increases. Conversely, businesses with few claims enjoy lower rates.

3. Industry Classification

High-turnover industries like construction, hospitality, and seasonal agriculture often face higher base rates because they historically generate more unemployment claims.

4. State Economic Conditions

When a state's unemployment fund runs low, rates may increase across the board. California, for example, remains on its highest rate schedule "F" with a statutory 15% surcharge because the state's fund reserve ratio is below threshold.

2026 SUI Tax Rates by State

Here's a comprehensive breakdown of SUI tax rates and wage bases for 2026:

State	New Employer Rate	Rate Range	Wage Base
Alabama	2.7%	0.2% - 6.8%	$8,000
Alaska	1.50%	1.0% - 5.4%	$54,200
Arizona	2.0%	0.03% - 8.36%	$8,000
Arkansas	2.0%	0.2% - 10.1%	$7,000
California	3.4%	1.5% - 6.2%	$7,000
Colorado	3.05%	0.81% - 12.34%	$30,600
Connecticut	1.9%	1.10% - 10.00%	$27,000
Delaware	1.2%	0.6% - 5.6%	$14,500
Florida	2.7%	0.1% - 5.4%	$7,000
Georgia	2.7%	0.04% - 8.1%	$9,500
Hawaii	2.4%	2.4% - 5.6%	$64,500
Idaho	1.0%	0.208% - 5.4%	$58,300
Illinois	3.35%	0.75% - 7.05%	$14,250
Indiana	2.5%	0.5% - 7.4%	$9,500
Iowa	1.0%	0.0% - 7.0%	$39,500
Kansas	1.75%	0.0% - 6.95%	$15,100
Kentucky	2.7% - 9.0%	0.3% - 9.0%	$12,000
Louisiana	Varies	0.09% - 6.2%	$7,000
Maine	2.54%	0.31% - 6.60%	$12,000
Maryland	1.0% - 2.6%	0.3% - 7.5%	$8,500
Massachusetts	2.13%	0.83% - 12.65%	$15,000
Michigan	2.7%	0.06% - 10.3%	$9,000
Minnesota	Variable	0.4% - 8.9%	$44,000
Mississippi	1.0% - 1.2%	0.2% - 5.4%	$14,000
Missouri	2.376%	0.0% - 6.0%	$9,000
Montana	1.0% - 2.0%	0.0% - 6.12%	$47,300
Nebraska	1.25%	0.0% - 5.4%	$9,000
Nevada	3.0%	0.25% - 5.4%	$43,700
New Hampshire	1.7%	0.1% - 7.5%	$14,000
New Jersey	2.8%	0.5% - 5.8%	$44,800
New Mexico	1.0% - 1.25%	0.33% - 6.4%	$31,700
New York	3.4%	0.4% - 9.9%	$17,600
North Carolina	1.0%	0.06% - 5.76%	$34,200
North Dakota	1.00% - 9.67%	0.07% - 9.67%	$46,600
Ohio	2.85%	0.4% - 10.1%	$9,000
Oklahoma	1.5%	0.2% - 5.8%	$25,000
Oregon	2.4%	0.9% - 5.4%	$56,700
Pennsylvania	3.822%	1.419% - 10.3734%	$10,000
Rhode Island	1.21%	0.9% - 9.4%	$31,300
South Carolina	1.06%	0.06% - 5.46%	$14,000
South Dakota	1.20%	0.0% - 9.5%	$15,000
Tennessee	2.7%	0.01% - 2.3%	$7,000
Texas	2.7%	0.32% - 6.32%	$9,000
Utah	Varies	0.1% - 7.1%	$50,700
Vermont	1.0%	0.4% - 5.4%	$15,400
Virginia	2.5%	0.1% - 6.2%	$8,000
Washington	Variable	0.27% - 8.15%	$72,800
West Virginia	2.7%	1.5% - 8.5%	$9,500
Wisconsin	3.05% - 3.25%	0.0% - 12.0%	$14,000
Wyoming	Varies	0.0% - 8.5%	$33,800

Note that states may update these figures throughout the year. Always verify current rates with your state's Department of Labor.

Understanding the Wage Base

The wage base is the maximum amount of an employee's annual wages subject to SUI tax. Once an employee's earnings exceed this threshold, you stop paying SUI tax on their additional wages for that year.

For example, if you're in Utah with a wage base of $50,700 and your employee earns $80,000 annually, you only pay SUI tax on the first $50,700. The remaining $29,300 is not taxed for SUI purposes.

This is why employee turnover can dramatically increase your SUI costs. Every time an employee leaves and you hire a replacement, you restart the wage base calculation for the new hire, potentially paying SUI tax on wages you wouldn't have paid if the original employee stayed.

How to Calculate Your SUI Tax

The basic formula is straightforward:

SUI Tax = Taxable Wages x Your SUI Rate

Let's say you're a Texas employer with a 2.7% rate and the $9,000 wage base. For an employee earning $50,000:

• Taxable wages: $9,000 (the wage base cap)
• SUI tax: $9,000 x 0.027 = $243 per employee per year

For a business with 20 employees, that's $4,860 annually in SUI taxes at the standard new employer rate. But if your experience rating pushes you to the maximum 6.32% rate, that same workforce costs you $11,376 in SUI taxes.

7 Strategies to Lower Your SUI Rate

Reducing your SUI rate requires a proactive approach to workforce management and claims administration:

1. Reduce Employee Turnover

Every unemployment claim potentially raises your experience rating. Invest in employee retention through competitive compensation, positive work culture, and clear career paths. The cost of retention programs often pales in comparison to increased SUI rates.

2. Document Everything

Maintain thorough personnel records including:

• Signed employee handbooks with policy acknowledgments
• Written warnings for performance issues
• Documentation of misconduct
• Records of policy violations

Strong documentation helps you contest unemployment claims when former employees were terminated for cause.

3. Respond Promptly to Claims

When the state notifies you of an unemployment claim, respond by the deadline with all relevant documentation. Many employers lose claims simply by missing deadlines or providing incomplete information.

4. Contest Inappropriate Claims

Not every unemployment claim is valid. Former employees terminated for gross misconduct, those who voluntarily resigned, or workers who refuse suitable work may be ineligible for benefits. Review each claim carefully and appeal when appropriate.

5. Conduct Exit Interviews

Document the circumstances of every separation. Having a written record of why an employee left, including their own statements, can be invaluable when contesting claims.

6. Make Voluntary Contributions

Some states allow employers to make voluntary contributions to their unemployment account to reduce their tax rate. If your rate increased due to claims, this option lets you buy down your rate, which may cost less over time than paying the higher rate.

7. Audit Your Rate Notice

When you receive your annual rate notice, review it for errors. Verify that:

• All charged claims actually involve your former employees
• The wages and payroll figures are accurate
• No claims were charged after the appeal deadline
• Benefit charges align with your records

States do make mistakes, and catching errors can prevent you from paying more than you should.

Important 2026 Changes

Several notable changes affect SUI taxes in 2026:

New York Eliminates Surcharge

New York paid off its federal unemployment insurance loan, eliminating the Interest Assessment Surcharge (IAS) that employers faced from 2021-2024. This saves NY employers an average of $100 per employee in 2026 and $250 per employee in 2027.

Minnesota Launches Paid Leave Program

Minnesota's Paid Family and Medical Leave (PFML) program goes into effect January 1, 2026, integrated with the state's SUI system. Employers should review their payroll processes to ensure compliance.

California Maintains High Rate Schedule

California continues operating on rate schedule "F" with its 15% surcharge due to fund reserve shortfalls, meaning California employers still face elevated SUI costs.

FUTA Credit Implications

Employers in states with outstanding federal unemployment loans may see reduced FUTA credits. The standard FUTA rate is 6.0%, but employers typically receive up to a 5.4% credit for timely SUI payments, reducing the net rate to 0.6%. States with unpaid federal loans may face credit reductions that increase employer costs.

Penalties for Non-Compliance

Failing to meet SUI obligations carries serious consequences:

• Fines: New York imposes penalties up to $10,000; Massachusetts penalties range from $25 to $2,500 depending on workforce size
• Increased rates: Late or missed payments can result in higher experience ratings
• FUTA credit denial: States may not certify your SUTA payments, causing you to lose the federal tax credit
• Audits: Non-compliance flags your business for closer scrutiny
• Legal action: Continued failure to pay can result in liens, levies, and lawsuits

Registration and Payment Requirements

New Employer Registration

When you hire your first employee, you must register with your state's unemployment agency. You'll provide:

• Business information (name, address, EIN)
• Industry classification
• Estimated number of employees
• Estimated quarterly payroll

Most states assign your rate within 30-60 days of registration.

Payment Schedule

Most states require quarterly SUI payments and reports, typically due by:

• April 30 (Q1)
• July 31 (Q2)
• October 31 (Q3)
• January 31 (Q4)

Some states have different due dates or allow annual reporting for small employers.

Recordkeeping

Maintain payroll records for at least four years, including:

• Employee names and Social Security numbers
• Wages paid and dates
• SUI contributions
• Any claims and correspondence

Keep Your Finances Organized from Day One

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