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How do benefit charges for unemployment compensation claims affect an employer’s tax rating account?

When an individual files a claim for benefits, two determinations are made. The first is a monetary determination of the amount of benefits the claimant may receive based on his/her wages paid in a specified time period (base period). The second is a non monetary determination that considers the claimant’s eligibility for benefits and reason for separation from employment. Both determinations affect the charging of the employer’s account.

The gross wages paid to a claimant by all employers in the base period are used in determining a claimant’s weekly benefit amount (WBA) and maximum benefit amount (MBA). An employer’s charging for benefits is based on the following elements.

  1. Base Period Gross Wages Paid by the Employer – The base period is defined in Alabama’s UC law as the first four of the last five completed calendar quarters prior to the filing of the claim, and is used to establish eligibility for benefits.
  2. Cost Ratio (Percentage) – If a claimant has only one employer in the base period, that employer’s account would be charged for 100% of the cost for benefits paid and chargeable. If the claimant had two or more employers during the base period, each employer’s liability would be determined by its percentage of the total gross wages paid by all base period employers.

    The percentage, times the total amount of benefits ultimately received by the claimant while unemployed, equal the employer’s benefit charges. After the end of each quarter an employer receiving benefit charges during the quarter is mailed a statement of the benefit charges. Benefits charged to the employer’s account may increase the employer’ tax rate and result in higher tax payments that will enable the Trust Fund to recover the benefits paid over a three year period. You may contact the Experience Rating Section at the telephone number and address shown at the end of this section if you have other questions.