Employer Basics: Unemployment Insurance in Illinois

Many new business that hire the first employee are surprised to learn about all the new expenses that come with him or her. There are FICA taxes to be paid, and workers compensation and unemployment taxes. Of the all the new taxes you get the pleasure of paying, your unemployment tax rate is the only one you can control.

The obligation to pay unemployment taxes in Illinois are triggered by any one of the following:

  • The employer pays $1,500 in wages in a single calendar quarter, or employed one or more persons for 20 weeks in a given calendar year; or
  • The employer pays $1,000 in cash wages in one calendar quarter for domestic work; or
  • The employer pays $20,000 in cash wages in one calendar quarter or employed 10 or more workers for 20 weeks in a given calendar year for farm work; or
  • A nonprofit organization acquires four or more employees during each of 20 weeks in a given calendar year; or
  • A local governmental organization pays any wages at all.

Once you qualify you face numerous obligations.  But the issue of interest here is the rate of tax you pay and how a small business with the help of its attorney can control that cost and minimize it..

How is Your Unemployment Tax Calculated

As with most states, unemployment tax is taken from a base rate. In Illinois the base rate is $12,960 and that means only the first $12,960 paid to an employee is subject to unemployment tax. In Illinois unemployment tax rate ranges from 0.55% to 7.75%. Accordingly, an employer may pay between $71.28 and $1,004.40 (per employee) into the Illinois Unemployment fund.

The “new employer rate” (applicable to new businesses) is 3.55% for 2016 (this can change depending on your particular industry). This new employer rate is in effect for three years, but it can increase..

How is the Unemployment Rate Determined

The percentage that an employer pays is dependent on the number employees who claim and receive unemployment benefits from the State of Illinois as a result of being terminated from your business. As the amount of the benefits increase the employer’s variable rate will also increase..

For more information or any questions about unemployment insurance in Illinois, contact Maduff & Maduff today.