Unemployment Insurance (UI) Tax
The UI program is part of a national program administered by the U.S. Department of Labor under the Social Security Act. The UI program provides temporary payments to individuals who are unemployed through no fault of their own.
UI is paid by the employer. Tax-rated employers pay a percentage on the first $7,000 in wages paid to each employee in a calendar year. The UI rate schedule and amount of taxable wages are determined annually. New employers pay 3.4 percent (.034) for a period of two to three years. EDD notifies employers of their new rate each December. The maximum tax is $434 per employee per year. (Calculated at the highest UI tax rate of 6.2 percent x $7,000.)
Governmental and certain nonprofit employers may elect the reimbursable method of financing UI in which they reimburse the UI Fund on a dollar-for-dollar basis for all benefits paid to their former employees.