ALABAMA – Unemployment taxes paid by Alabama businesses are increasing almost double this year. The Alabama Department of Labor says although this will put a burden on business owners, the increase is unavoidable.
At the end of January, the Alabama Department of Labor will send out its final tax rates for 2021 and the rate employers must pay is increasing approximately 92%.
The Department of Labor says the average per-employee paid rate will increase from an average of $52 to $100 or more. The spike is directly related to the unprecedented amount of unemployment payouts throughout 2020.
“Back in March, we decided we would waive those employer charges for pandemic related claims,” says Alabama Department of Labor spokesperson Tara Hutchison.
The department says it’s having to recoup the money it lost in waived taxes.
“All of those costs are going into what we call the ‘pool cost’ or ‘shared cost’ which means all the employers within the state of Alabama will pay their share of those claims,” explains Hutchison.
ADOL secured $385 million in CARES Act funding to help offset the loses, but it wasn’t enough to avoid an unemployment tax increase.
“Without any kind of action, without any infusion of CARES Act funding, employers would have been looking at around a 500 percent tax increase for this year, for 2021,” says Hutchinson.
The Department of Labor says it tried to mitigate the impact of the pandemic on businesses, but raising taxes was unavoidable.
“At the end of the day, the charges have to go somewhere and unfortunately the employers are the ones that are going to have to make up that cost,” says Hutchison.
Unemployment taxes are paid 100% by the employer and are what make up the Alabama Unemployment Insurance Trust Fund.