Making Voluntary Unemployment Tax Contributions
If a state uses the reserve ratio method described in the previous section to arrive at the contribution rate charged to a business, then the business may have the option to contribute additional funds into its account. By doing so, it can improve its experience rating and thereby reduce the contribution rate charged by the state. In most cases, a company must make the decision to contribute additional funds within 30 days of the date when a state mails its notice of contribution rates to the company. The decision to pay additional funds to the state should be based on a cost-benefit analysis of the amount of funding required to reduce the contribution rate versus the reduced amount of required contributions that will be gained in the next calendar year by doing so.
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Changes in the state contribution rate are based on four possible formulas (see the "Calculating the Unemployment Tax Contribution Rate" section); however, the key issue for all formulas (excepting Alaska's) is the amount of unemployment benefit claims by former employees of a company, so obviously the smallest number of employee terminations will result in the smallest contribution rate. Keeping this in mind, if a possible layoff is coming up, it may be worthwhile to verify the exact time period over which the next contribution rate calculation will be made (usually the calendar year), and then time the layoff for a period immediately thereafter, so that the contribution rate for the next year will not be affected. By taking this action, the contribution rate in the following year will increase as a result of the layoff, thereby pushing the added expense further into the future.
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