NJ avoids ‘sticker shock’ for businesses in unemployment tax hike
Employers in New Jersey have a longer time to prepare to deal with the draining impact of the pandemic on the state's Unemployment Trust Fund under legislation signed by Gov. Phil Murphy.
The governor's action on Monday reduces the amount of an employer’s unemployment taxes through Fiscal Year 2023.
“A similar phase-in payroll tax measure was utilized after the financial crisis of 2007-2009,” according to New Jersey State Chamber of Commerce Executive Vice President of Government Relations Michael Egenton.
The measure also prevents a rate increase for employers who had to layoff workers during the pandemic through no fault of their own.
Rather than thrust businesses into the most expensive payroll tax column come July under the system's automatic trigger to replenish the fund, the legislation spreads out higher payments over a longer period of time, Egenton said, giving some reprieve to businesses hard hit by the ongoing public health crisis and its restrictions.
More than $6.1 billion was paid out in benefits from the state Unemployment Trust Fund over the nine-month span from March to December, alone.
Without the action by legislators, businesses would have faced a steep column "E" unemployment tax increase at the start of the new fiscal year in July.
Egenton said the NJ Chamber of Commerce applauds legislators — including the governor, Senate President Steve Sweeney, Assembly Speaker Craig Coughlin and sponsors Senator Fred Madden and Assembly Majority Leader Lou Greenwald - for support in avoiding such “sticker shock” for businesses.
Murphy's office said short-term savings are made possible by interest-free federal unemployment insurance advances, which were extended under the recent federal stimulus package through March 14.
Separate from Monday's action, as of January, employee and employer state Unemployment Insurance and Workforce Development/Supplemental Workforce Funds tax rates apply to the first $36,200 of an employee’s earnings in 2021 (up from $35,300 in 2020), as announced by the state Department of Labor.
New Jersey’s maximum unemployment insurance weekly benefits rate for 2021 is $731 (up from $713 in 2020).
Meanwhile, the temporary disability & family leave insurance maximum weekly benefit rate is $903 (up from $881 in the second half of 2020 and $650 in the first half of 2020), according to the NJ Chamber of Commerce, which also confirmed that the maximum workers’ compensation weekly benefit rate is $969 in 2021 (up from $945 in 2020).
The rates are adjusted annually, to reflect increases in average taxable wages of covered employees.