Every few years, Ohio business owners may notice unexpected increases in their unemployment insurance rates. At first, they may think that this is an error, but it’s actually part of regularly-scheduled increases called mutualized rates that apply to businesses across the state.
If you’re one of those Ohio business owners, you probably have a few questions, such as “what is a mutualized rate” and “why is Ohio charging me extra every few years?” Those are both very valid questions, so here’s a quick rundown on extra mutualized rates in the Buckeye State.
What are Extra Mutualized Rates?
While the rate increases may come as a surprise, they’re part of a regular schedule. Every four years, the State of Ohio introduces an extra mutualized rate of 0.6 percent, which accounts for why you’re contributing more toward insurance than you expected. In fact, 2017 is one of the years that an extra mutualized rate is assessed.
So why does Ohio add these rates every four years? The reason is to replenish the state mutual fund.
The Office of Unemployment Insurance Operations states that “the primary purpose of the mutualized account is to maintain the unemployment trust fund at a safe level and recover the costs of unemployment benefits that are not chargeable to individual employers.” In more basic terms, the rate increase is used to create a pool of money to fund certain unemployment payments.
Let’s say there are unemployment claims at a company that went out of business, or someone resigned and went to work for a company that laid them off. Both situations are allowed claims, so the unemployment trust fund would pay for them through the contributions you, and any other Ohio business, makes through the 0.6 percent extra mutualized rate.
Managing Your Unemployment Rates
While there are certain elements, like the extra mutualized rates, that are unavoidable expenses, there are ways to manage unemployment taxes so that your business can cut costs each year. Group Management Services can help you employ strategies to reduce unemployment tax risks and increase cashflow.