Unemployment Compensation (members ed.)
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Computing the experience tax rate
Disqualification for unemployment compensation
Definition of Employment
Employment means any service performed for wages or under any contract of hire, written or oral, expressed or implied, provided that any services performed by an individual for wages. Any employer who is in doubt as to his or her liability under the Texas Unemployment Compensation Act should contact the Texas Workforce Commission (TWFC) for a determination.
Who's Covered
An employer and its workers are covered under the unemployment compensation program, if:
In the current or preceding calendar year the employer paid as much as $1,500 in wages in any calendar quarter.
Or the restaurant employed at least one individual for some portion of the day in each of 20 different days, each day being in a different calendar week.
Coverage Requirements
Employers in Texas with full- or part-time employees are required to file Form C-1, "Employer's Status Report." If it is determined that the employer is eligible for coverage, the employer will be notified and assigned an account number. An employer is any individual, corporation, partnership, association, organization or other entity that employs one or more persons. Every employer in the state is required to maintain accurate, up-to-date payroll records for each employee, whether permanent or temporary.
Reports and Tax Payments
Liable employers must file quarterly tax reports with the Commission on or before the last day of the month following the end of a quarter, i.e., January, April, July and October. Approximately six weeks prior to the due date, reporting forms are mailed to each active account. Failure to receive forms does not relieve an employer of the responsibility for filing reports.
Employers must pay tax at their assigned tax rate on the first $9,000 of each employee's wages and must report to TWFC total wages paid to each employee in each calendar quarter. Taxes are payable by the employer and no part may be deducted from any employee's wages. A late payment is subject to a penalty charge of 1.5% per month of the unpaid tax up to a maximum of 37.5%. Penalties are due in the event of late filing of a quarterly report. In addition, failure to file reports and pay taxes can result in a higher computed tax rate.
Wages
Wages are defined as all compensation paid for personal services, including the cash value of all compensation paid in any medium other than cash and gratuities received by any employee in the course of employment.
Tax Rates
An employer's effective tax rate is made up of three components:
General Tax - reflects the individual claims experience of the employer.
Replenishment Tax - reflects the employer's share of benefits that are not attributable to any individual employer.
Deficit Tax - reflects the condition of the Trust Fund on the date rates are calculated for the next year.
New Employers
New employers are assigned an entry-level tax rate of either 2.7% or the applicable Standard Industry Code average tax rate, whichever is higher. The entry-level tax rate will remain with the employer for approximately 18 months.
Computing the Experience Tax Rate
Annual experience tax rates are computed as of October 1 to be effective for the following calendar year. Notices of the rates are mailed to employers early in the year in which they are to be effective. An employer's general tax rate is determined by multiplying his benefit ratio by the statewide replenishment ratio for the preceding year.
Wage Reporting
During the month following each calendar quarter (April, July, October, and January), each employer submits an Employer's Quarterly Report. This report must show:
The total amount of wages paid during the quarter.
The total amount of Benefit Wage Credits.
The total amount of Taxable Wages Paid.
The Employer's Quarterly Report contains a Wages List on which the employer reports each employee's Benefit Wage Credits for the quarter. Employees are listed by social security number and name, and the amount of Benefit Wage Credits applicable. The first $9,000 paid to an employee by an employer during a calendar year constitutes taxable wages. An employer cannot consider wages paid by another employer to the employee in the calendar year in arriving at this limit unless he is a successor to the prior employer.
The amount of tax to be paid by an employer is computed by multiplying the amount of taxable wages paid during the quarter by the effective tax rate of the employer.
Definition of Employment
An unemployed individual can qualify for benefits if during the Base Period sufficient wage credits were earned from employers covered by the Act. A base period is the first four of the last five completed calendar quarters immediately preceding the date of an initial claim for unemployment compensation.
To claim unemployment benefits, claimants must first register for work at the Texas Workforce Commission. After registering for work, they may then file an initial claim for unemployment compensation showing the name of the employer for whom they last worked and the reason for their unemployment.
Claimants may file continued claims for periods of seven days following filing the initial claim, which is not payable. The continued claims are necessary to receive weekly payments of unemployment compensation.
To remain eligible for unemployment compensation, the claimant must:
Be less than full-time employed
Not have had earnings equal to or in excess of the weekly amount of unemployment insurance plus $5 or 25% of the weekly benefit amount, whichever is greater.
Be able to work and must be available for work during the seven days for which the claims are filed.
Make an active search for work.
Serve a waiting period of one week covered by a payable continued claim before qualifying for any payment of unemployment insurance. The claimant may be paid for this week-long waiting period claim if, during this benefit year, the claimant draws benefits totaling three times the weekly benefit amount for which the claimant qualified.
Disqualification for unemployment compensation
Claimants who quit their last work voluntarily without good cause connected with the work.
Employer Protest of Benefits
An employer has twelve (12) days from the date the notice of unemployment compensation is mailed in which to mail or deliver a protest. Such protest should be mailed or delivered to the office from which notice of the claim was mailed.
When the protest is accepted or rejected, the employer is notified by mail. If the employer desires to appeal the decision, he has fourteen (14) days after the date of notification.
When an appeal is received by the Commission, and the Commission has rendered a decision, a request for reconsideration may be made to the Commission within fourteen (14) days after the date of the Commission's decision. If a request for reconsideration is not made to the Commission, appeal may be made to any court of competent jurisdiction in the county of the claimant's residence after the fourteenth day following the date of the Commission's decision and must be made before the end of the twenty-eighth (28) day.
Payday Law
The Texas Payday Law governs wage claims between employees and employers. Every private individual, sole proprietor, partnership, corporation, organization, association, or business entity that employs one or more persons is subject to the Texas Payday Law. The Texas Workforce Commission (TWFC) administers all disputes arising from violations of the Payday law.
How to Comply
Pay wages at least twice a month to employees not exempt from overtime, and at least once a month to those who are exempt.
Pay commissions, bonuses and fringe benefits on time, as agreed to in writing or within a reasonable time.
Make semi-monthly pay periods as equal in length as possible.
Designate paydays. If you do not, the law says they are the first and 15th of each month.
Post notices of paydays in conspicuous places.
Pay an absent employee on a regular business day at the employee's request.
Pay a discharged employee in full no later than the sixth day after discharge, and other employees who leave no later than the next scheduled payday.
Pay wages by electronic funds transfer, check negotiable on demand or cash unless the employee agrees in writing to payment in another form.
Send wages by registered mail to arrive by payday, or deliver wages to employees at work unless a written employee agreement states otherwise.
Do not deduct from an employee's wages unless ordered by a court of competent jurisdiction, authorized by state or federal law, or authorized for a lawful purpose in writing by the employee.
Money an employee owes the business can NOT be deducted from a paycheck.
Penalties
Failure to comply with the Payday Law, could result in significant financial penalties, potential closing of business and incarceration.
Claim Hearings
Appeal tribunal hearings under the Texas Payday Law are quite similar to hearings conducted for unemployment compensation claims, with the following differences.
Individuals may file wage dispute claims by mail as well as in person.
An investigation stage takes place before issuance of a preliminary determination order.
A rehearing may be scheduled before the appeal tribunal makes a final order.
The Payday Statute does not provide for a Commission review of an appeal tribunal's decisions. Therefore, all administrative remedies, including a rehearing, must be exhausted before an employer can take the case to a court of competent jurisdiction.
A bankruptcy filing by an employer will suspend a Payday Law case.
