The majority of employers are liable to pay unemployment insurance taxes. The following information will help employers determine if they must pay the tax.
Who needs to register?
- Any employer with one or more workers during 20 different weeks in a calendar year or who has paid $1,500 or more in wages in a calendar quarter
- Any employer who acquires the business of another liable employer
- Any employer employing workers in North Dakota who is liable under the Federal Unemployment Tax Act (FUTA)
- Political subdivisions and Indian tribes or business enterprises wholly owned by Indian tribes become liable immediately upon employing any non-excluded workers
- Nonprofit organizations with 501(c)(3) income tax exemptions are liable if they employ four or more workers during 20 different weeks in a calendar year
- Employers of agricultural labor are liable if they pay $20,000 or more in wages in a calendar quarter or employ ten or more workers in 20 different weeks in a calendar year
- Employers of domestic labor in a private home, local college club, or local chapter of a college fraternity or sorority are liable if they pay $1,000 or more in wages in a calendar quarter
Exclusions from unemployment insurance taxes
Some types of employment are excluded from the unemployment insurance tax. The most notable exclusion is for service performed for a son, daughter, or spouse, or services performed by a child under age 18 for a parent while living in the parents' home. This exclusion does not apply to corporations or certain limited liability companies (LLC). It applies to partnerships only if the worker has an exempting relationship with each partner.
Corporations and Limited Liability Companies
Corporate officers who perform services for the corporation and receive remuneration for that service are considered employees. The same applies to LLC managers if:
- The LLC is treated as a corporation for federal income taxation or,
- The manager(s) is not a member.
Employers of certain corporate officers and certain covered LLC managers with 25% or more ownership interest may, with the concurrence of the officer or manager, apply to exclude the officer's or LLC manager's services from employment. The application to do so must be filed within 60 days of formation of the corporation/LLC, or in January of the year in which the exclusion is to begin.
Determination of Taxable Wage Base
Your unemployment insurance tax rate is determined by your business status. The maximum amount of each worker's wages subject to taxation is determined yearly and equals 70% of the calculated statewide average annual payroll. Refer to the Employer Handbook for more details.
When employers become liable for unemployment insurance they are classified as “new employers” and are assigned a new employer rate. Tax rates are re-determined for each calendar year based on the employer’s history as of the preceding October.
If, prior to October, “non-construction” employers have at least six quarters of coverage and “construction employers” have at least ten quarters of coverage, they are classified as “experience-rated employers” beginning the following calendar year; otherwise, they are classified as “new employers.” Experience-rated employers are assigned rates based on their record of unemployment insurance taxes paid and benefits charged.
The rates vary each year depending on the employer’s individual history and the condition of the state’s unemployment compensation trust fund. Check our website for the current rate schedules.
Employers who acquire an existing business may apply for the experience record of the previous owner. If the experience record is transferred, the new owner is also held accountable for any benefits paid to the previous owner’s workers. In certain cases, such as those where common ownership, management or control exist, the transfer of the experience record may be mandatory.
The maximum amount of each worker’s wages subject to taxation is determined yearly and equals 70% of the calculated statewide average annual payroll.
Tax rates are re-determined for each calendar year based on the employer's history as of the preceding October. If, prior to October, non-construction employers have at least six quarters of coverage and construction employers have at least ten quarters of coverage, they are classified as "experience-rated employers" beginning the following calendar year. Experience-rated employers are assigned rates based on their record of unemployment insurance taxes paid and benefits charged.
Transfer of experience record
Employers who acquire an existing business may apply for the experience record of the previous owner. If the experience record is transferred, the new owner is also held accountable for any benefits paid to the previous owner's workers. In certain cases, such as those where common ownership, management or control exist, the transfer of the experience record may be mandatory.
Government, tribal or 501(c)(3) organizations
Some entities, such as government, tribal or 501(c)(3) organizations, have the option of financing benefits by reimbursement rather than the payment of taxes. Under this method, the employer reimburses the trust fund each quarter for all benefits paid to the employer's former workers. Employers selecting this option should be aware that the charges waived for some tax-rated employers will not apply to reimbursing employers.
Visit our reimbursement method for more information.
Special reduced rate provision
The "rate reduction" provision in the North Dakota Unemployment Compensation Law provides incentives to employers who have made investments and taken steps to change their business operations in order to reduce the length of time their workers are on layoff, and reduce total benefit charges against their accounts.
The Executive Director of Job Service North Dakota may provide negative balance employers with up to a 30% reduction to the employer's rate for unemployment insurance for any year if:
- The employer's current year's Cumulative Lifetime Reserve is in a negative status.
- Immediately preceding the tax year for which the reduction is considered, the employer has experienced three consecutive fiscal years (October through September) where that employer's total contributions paid to the Trust Fund have exceeded benefit charges against their account(s).
- The employer has a plan in place, approved by Job Service North Dakota, that addresses and documents substantive investments and/or changes to that employer's business operations to reduce the amount of time their workers are on layoff status and reduce charges against their unemployment insurance account(s).
- An account analysis determines that the rate reduction does not bring the employer's tax rate below 5.4%. It must also ensure that any rate reduction will not put the employer's account(s) back into a negative status, meaning benefit charges exceed contributions in the business plan tax year. The business plan tax year is the calendar year for which the business plan is being prepared.
Visit the reduced rate provision to apply. Applications must be submitted no later than March 31st of each tax year.