The Senate unanimously gave final approval to a bill, strongly supported by NJBIA, which would protect employers from being hit with a massive spike in unemployment insurance taxes by phasing in more manageable increases over a period of three years.
The bill, A-4853, is important to the business community, which otherwise faces a $1 billion payroll tax increase all at once on July 1, 2021. The legislation, sponsored by Assembly Majority Leader Lou Greenwald (D-6), was previously approved by the Senate on Oct. 29, but a re-vote was needed today to correct a procedural error. The bill now awaits action by Gov. Phil Murphy.
“Without this legislation, the upcoming payroll tax increase would penalize struggling employers who had layoffs that were beyond their control during the pandemic,” said Christopher Emigholz, NJBIA Vice President of Government Affairs.
More than 1.74 million people have applied for unemployment benefits in New Jersey since the pandemic began in mid-March, and the Department of Labor said last month it has distributed $18.1 billion in total compensation to unemployed and under-employed workers during COVID-19.
The bill is designed to help employers by addressing both their business-specific experience and the rates driven by the overall health of the fund, Emigholz said. These are known as the Employer Reserve Ratio and the Unemployment Trust Fund Reserve Ratio, respectively.
First, the bill would exclude the cost of unemployment benefits paid to employees of an employer during the pandemic when calculating the employer’s Reserve Ratio.
Second, the bill addresses the Unemployment Trust Fund Reserve Ratio, which determines what column on the unemployment tax table will be in effect for all employers when the next fiscal year begins July 1. Without intervening legislation, employers would move immediately on July 1 to the highest rate: Column E+10%. The bill would instead gradually shift employers to Column C on July 1 (fiscal year 2022); then to Column D in fiscal year 2023; and Column E in fiscal year 2024.
“This will hopefully help employers recover from the COVID-19 downturn before they have to worry about paying the higher UI rates,” Emigholz said. “The bill also includes a downward rate adjustment if the UI fund naturally recovers faster than expected.”