Maryland employers will face significantly higher unemployment insurance (UI) tax rates beginning next year.

Tax rates will increase for all employers, but the specific tax rate an employer pays is determined by the employer’s individual experience, factoring in whether the employer had laid off any employees in the past year. In Maryland, the first $8,500 an employee earns is taxable for unemployment insurance. Minimum rated employers, those who have not laid off employees, will see their rates increase from $51 per employee to $187 per employee. The rate increase for employers that have laid off employees in recent years will be higher, up to the maximum rate, which will increase from $765 per employee to $1,147.50 per employee.

State law requires the Department of Labor, Licensing and Regulation to review the Unemployment Insurance Trust Fund each September 30. The UI tax rate automatically increases if the balance of the fund falls below a certain level. There are six tax tables, ranging from the lowest (A) to the highest (F). Maryland’s Trust Fund has dropped from $774 million in January 2009 to below $400 million this month. Because the ratio of the balance in the trust fund to the total taxable wages in the state is below 3 percent, Maryland will move from tax rate table B to rate table F.

The amount an employer will have to pay under the new table can be determined by multiplying the taxable income by the tax rate. The change in tables is as follows:

Table B (2009):
Minimum tax rate .6% * $8500 = $51 (taxes paid per employee)
Maximum rate 9% * $8500 = $765

Table F (effective January 2010):
Minimum tax rate 2.2% * $8500 = $187
Maximum tax rate 13.5% * $8500 = $1,147.50

The tax rates will be up for review again on September 30, 2010. If the trust fund does not improve in that time, the state will remain in Table F.

For more information about the UI tax rate increases, contact Allyson Black at ablack@mdchamber.org.