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How to Reduce Your Ohio Unemployment Employer Tax Risk

November 10, 2022 by Wayne Rottger

Ohio employer reviewing their unemployment tax risk

Unemployment Insurance (UI) provides temporary payments to eligible workers on a weekly basis while they look for work. UI programs are managed at the state level, with federal oversight by the U.S. Department of Labor. In other words, states have their own programs but must adhere to the same guidelines established by federal law. Laying off employees is a normal part of doing business and employers play an important role in supporting those workers with temporary unemployment insurance benefits funded by an unemployment tax. Therefore, they need to understand their responsibilities and how unemployment claims affect their taxes. Given that sometimes it can be challenging to understand precisely how UI works and what happens when former employees file for unemployment claims, we have created a blog series outlining unemployment tax in different states. The following guide can be used to help you reduce your Ohio unemployment employer tax risk by understanding both employer liability and employee eligibility.

Ohio Unemployment Employer Tax Liability

The Ohio UI program is administered by the Ohio Department of Job and Family Services (DJFS). UI employer liability in Ohio is established when an employer has:

  1. At least one employee in covered employment for some portion of a day in each of 20 different weeks within either the current or the preceding calendar year; or
  2. Paid wages of $1,500 or more to employees in covered employment in any calendar quarter within either the current or the preceding calendar year;

In the case of domestic service, UI employer liability in Ohio is established when an employer has paid cash remuneration of $1,000 in a calendar quarter within either the current or the preceding calendar year.

In the case of a farm operator or crew leader in agricultural labor, UI employer liability in Ohio is established when an employer has paid cash remuneration of $20,000 or more in a calendar quarter or had at least 10 individuals in agricultural employment for some portion of a day in each of 20 different weeks in either the current or the preceding calendar year.

In the case of an organization exempt from income tax under Section 501(a) of the Internal Revenue Code as described in Section 501(c)(3) of that code, UI employer liability in Ohio is established when an employer has had four or more employees in covered employment for some portion of a day in each of 20 weeks in either the current or the preceding calendar year.

In the case of the state, its instrumentalities, its political subdivisions, their instrumentalities and Indian tribes, UI employer liability in Ohio is established if the employer had at least one individual in employment.

Only the wages paid to employees in covered employment can be used in establishing and determining the unemployment benefit amounts payable if and when such employees become unemployed.

UI employer liability in Ohio can also be established by:

  1. Having been subject to the Federal Unemployment Tax Act in either the current or preceding calendar year,
  2. Acquiring all or part of a business from an employer who was subject to the Ohio law at the time the change of ownership occurred; or
  3. Electing to cover employees voluntarily.

Employers are responsible to report liability as soon as one or more employees are in covered employment. This may be done online using the Ohio unemployment employer login at thesource.jfs.ohio.gov or by submitting the JFS 20100, Report to Determine Liability, to the Ohio DJFS. Failure to promptly report UI employer liability in Ohio can result in the issuance of late filing assessments. The Ohio unemployment employer login page also advertises several benefits for filing online, but there are additional ways employers can improve their unemployment cost management.

Duration of Liability in Ohio

UI employer liability in Ohio is determined on a calendar year basis and is effective with the beginning of the calendar year that the employer first becomes liable. Such liability continues through that calendar year and for each succeeding calendar year. During the entire period of liability, the employer must continue to file quarterly reports even if no taxable wages are paid.

UI Employee Eligibility in Ohio

The Ohio DJFS determines eligibility for workers claiming unemployment benefits in the state. To meet the necessary requirements for UI employee eligibility in Ohio, claimants must:

  • be registered and available for work,
  • be physically and mentally able to perform suitable work and actively seeking work,
  • have been employed for at least 20 weeks within their base period,
  • have been paid an average weekly wage of at least 27.5% of the applicable state average weekly wage, and
  • have been paid wages in at least two quarters of their base period

The reason for the unemployment must be non-disqualifying and claimants must certify that no refusal of or referral to suitable work occurred. On the eighth week after the week their benefits claims was filed, individuals must report to a county office for reemployment services to maintain eligibility.

Also, before establishing UI employee eligibility in Ohio, claimants must report earnings for work performed and income paid or payable while claiming unemployment benefits. To avoid possible delay of benefits, penalties and possible criminal prosecution, claimants are obliged to report earnings and income information honestly, accurately and timely.

DJFS considers recent work history and earnings during a one-year base period to determine UI employee eligibility in Ohio. The base period is the earliest four of the five complete calendar quarters before claimants filed their benefits claim.

To qualify for unemployment benefits in Ohio, claimants must meet both of these requirements:

  • They must have worked at least 20 weeks during the base period; and
  • They must have earned an average of at least $280 per week during the base period.

Former employees who do not qualify for benefits using this standard base period may qualify under an alternative base period, which is the last four completed quarters before the week when filing a valid claim. Once UI employee eligibility in Ohio is established, the claimant, the most recent employer, and the base period employer are notified. The determination of the claimant’s benefit rights informs the interested parties whether the application has been allowed or disallowed. If it is disallowed, the reasons will be stated. If allowed, the determination will show the claimant’s average weekly wage, dependency class, weekly benefit amount, total benefits payable, the weeks and wages for each of their base period employers, and the reason for the worker’s unemployment.

Reducing Claims Impact on Your Ohio Unemployment Employer Tax

UI funds are derived from state and federal taxes that are paid for mostly by businesses. No matter what state employers are located in, they need to pay FUTA taxes. At the same time, each approved unemployment claim means that their SUTA tax rate will likely increase. Therefore, it is necessary to put proper procedures in place in order to reduce the impact of unemployment claims on businesses’ taxes.

To begin with, employers should understand their obligations when it comes to determining UI liability in different states but also comply with federal laws and regulations. Also, employers can reduce the SUTA tax by lowering their rate of employee turnover and minimizing the number of former employees who file for unemployment benefit payments during the calendar year. Finally, outsourcing unemployment claims management allows employers to effectively handle unemployment insurance claims, appeals and wage determinations, focus on resolving other pressing business challenges and achieve cost-efficiency.