COVID-19

Oregon UI Rates and Wage Base Increase for 2021

November 23, 2020

Does your business have Oregon payroll subject to state unemployment? Recently, the Oregon Employment Department started mailing 2021 Unemployment (UI) tax rate determination letters to employers. Employers may see a larger increase from their 2020 rates if they had employees receive UI benefits during 2020.

On November 13, 2020, the state announced unemployment will move to Tax Schedule 4 for the 2021 calendar year, a change from the (generally lower) Schedule 2 tax rates of 2020. Also, effective January 1, 2021, Oregon’s unemployment taxable wage base will increase to $43,800, up from $42,100 in 2020.

The announcement states, “Despite facing the highest unemployment rate in Oregon’s history, the 2021 payroll tax schedule is a modest shift from the 2020 tax schedule, with an average rate of 2.26 percent on the first $43,800 paid to each employee.” The state estimates approximately $1.8 billion in regular UI benefits have been paid since the outset of the pandemic in March. Benefit payments are sourced from the Oregon’s Trust Fund, which is funded by employer payroll taxes and is on course to remain solvent through the current recession.

Oregon’s tax structure is self-balancing, with two major parts:

  1. Movement between eight tax schedules: When the tax schedule changes, all employers move to that tax schedule.
  2. Assigned tax rates within a schedule: Individual employer tax rates depend on their experience rating or benefit ratio, which measures the rate at which their employees have received UI benefits.

The benefit ratio is determined by dividing the UI benefits charged to the employer by the employer’s taxable payroll. Employers whose workers receive a higher percentage of UI benefits compared to the employer’s UI taxable payroll may have a higher tax rate.

It is important for employers to review their 2021 UI tax rate determination letter to verify the benefit charge and taxable payroll are correct, as these numbers are used to calculate the benefit ratio. If employers believe any information in the letter is incorrect, they may request a “Review and Redetermination.”  These requests must be submitted to the Oregon Employment Department no later than December 3, 2020 (or per the date listed on the determination letter). The Oregon Employment Department has produced this FAQ, which may prove useful for those with detailed questions about the guidance.

Our expert team of state and local tax professionals at Geffen Mesher is ready and prepared to help navigate these changes for your business.

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