Legislative Update: South Carolina SB 688

South Carolina Senate Bill 688 change notification

South Carolina Senate Bill 688 proposes significant changes to the state’s unemployment insurance (UI) tax structure by revising how employer tax rates are calculated, establishing a new trust fund solvency target, and increasing penalties for employers that fail to meet reporting and payment obligations. Beginning with tax year 2027, the bill gradually expands the benefit ratio lookback period used to determine employer experience ratings from the current 12 calendar quarters to 16 quarters in 2027 and 20 quarters beginning in 2028.

The bill also replaces the current fund adequacy methodology with a new solvency target for the Unemployment Insurance Trust Fund and authorizes the Department of Employment and Workforce (DEW) to impose a solvency surcharge when the trust fund falls below that target. The surcharge would be designed to restore the fund within specified timeframes while limiting annual revenue increases under certain conditions. Additionally, employers with outstanding unemployment tax executions issued on or after January 1, 2027, would be subject to a contribution rate increase of 2% above their otherwise applicable UI tax rate rather than automatically being assigned the highest tax class. The legislation also removes the current $1,000 cap on penalties for failing to file required wage reports and for failing to timely pay unemployment contributions.

Effective date

July 1, 2026

South Carolina SB 688 implication to stakeholders

Employers could experience changes to their unemployment insurance tax rates as the expanded benefit ratio calculation incorporates a longer claims history into the experience rating formula. Businesses with stable employment histories may see more gradual changes in tax rates, while employers with higher benefit charges over a longer period may experience increased UI tax liability.

The new solvency surcharge mechanism may also result in additional unemployment insurance taxes when the trust fund balance falls below the state’s prescribed solvency target, creating greater variability in annual employer tax obligations. Employers with delinquent unemployment taxes will face stronger financial consequences, including a 2% contribution rate increase for certain outstanding tax executions and uncapped penalties for late filings and unpaid contributions, increasing the importance of timely compliance with DEW reporting and payment requirements.

Recommended employer action

Employers should review their unemployment insurance claims management and workforce practices to help minimize benefit charges that could affect future experience ratings under the expanded lookback period. Organizations should also monitor annual DEW communications regarding trust fund solvency and potential solvency surcharges when budgeting for payroll taxes.

In addition, employers should ensure unemployment tax reports and contributions are filed and paid on time, promptly resolve any outstanding tax liabilities, and review internal payroll compliance processes to avoid increased contribution rates and the expanded financial penalties proposed by the legislation.

Legislative Updates

Our Legislative Updates team is powered by Product Intelligence Managers who stay deeply connected not only with state unemployment agencies and departments of labor, but also with federal and state partners involved in employment verification, immigration compliance, and regulatory enforcement—including E‑Verify and related oversight entities. With extensive experience navigating the complex, fast‑moving landscape of HR, payroll, I‑9, and employment law, our authors monitor statutory and regulatory developments as they emerge or are being shaped behind the scenes.

 

Their expertise spans I‑9 and E‑Verify compliance, new‑hire processes, W‑2 and W‑4 requirements, payroll tax optimization, FLSA guidance, and multi‑jurisdictional employment law. Professional backgrounds include Certified Payroll Professionals and active members of organizations such as the APA, SHRM, ACC, and CPA. They bring a practitioner’s perspective to every update. Through strategic insights, best‑practice guidance, and compliance‑focused thought leadership, our team transforms complex regulatory shifts into actionable intelligence that helps employers reduce risk, streamline processes, and stay confidently compliant in an ever‑changing environment.