Great news for Arkansas employers as Act 734 of 2017 became effective January 1, 2018 enabling substantial reductions in unemployment contributions.
Friday, Eldredge & Clark Partner Mike Moore served as Chair of the Arkansas State Chamber of Commerce/AIA Unemployment Insurance/HR Committee that crafted the legislation resulting in Act 734. Mike was the primary author of the legislation.
Now employers will enjoy a 17 percent decrease, per employee, in their unemployment insurance (UI) taxes. Act 734 lowered the wage base on which the UI tax rate is applied from $12,000 to $10,000. Statewide this will yield a total savings to employers of approximately $50 to $60 million. This savings will appear when employers make their quarterly UI tax payments.
Each employer has an individualized tax rate that is based on their unemployment experience. This rate ranges from 0.1 percent up to 14 percent. In addition to the experience based tax rate, employers’ 2018 UI tax rate will include an additional 0.3 percent Stabilization Tax. This add-on tax ranges from 0.1 percent to 0.8 percent depending upon the relationship of the UI Trust Fund to total payrolls.
In addition to the state UI taxes, employers pay a federal UI tax (FUTA). The federal wage base is $7,000 and the rate is 6.0 percent. However, states that operate their UI program in compliance with federal law and employers submit their state UI taxes in a timely fashion, then the FUTA tax is reduced (credit) by 5.4 percent to 0.6 percent. Arkansas employers have consistently only had to pay the 0.6 percent rate.