All Kansas employers determined liable under the "contributing" provision of the Kansas Employment Security Act pay into the Unemployment Trust Fund maintained to distribute unemployment insurance benefits to qualified unemployed workers. The majority of these employers finance their unemployment tax liability by paying contributions determined by multiplying a specified rate times a taxable payroll based on the first $14,000 in wages earned by each employee during a calendar year. The taxable wage base for years prior to 2016 can be found here. Quarterly contributing employers submit K-CNS 100,Quarterly Wage Report and Unemployment Tax Return, to report wages and pay the amount of tax due.
Newly-Liable Employer Contribution Rates
A new employer is assigned a rate of 2.7 percent, except employers engaged in the construction industry. They are assigned a rate of 6.0 percent. After three years, when original liability is established before July 1, the employer will have a tax rate computed using its own experience factors. When liability is established after June 30, the employer will have a computed rate after four years.
Experience Rated Employer Contribution Rates
Experience rating helps ensure an equitable distribution of costs of the unemployment compensation program among employers. It is a procedure for varying employer rates and allocating costs of the Unemployment Insurance program in relation to the employer's actual and potential risk with unemployment. This is accomplished by keeping an individual experience rating account for each liable employer. All tax payments are added and all benefit charges are subtracted from the experience rating account. This provides an opportunity for contributing employers to "earn" a tax rate based on their own individual experience and their potential risk of unemployment. The procedure also helps to ensure an adequate UI Trust Fund balance.
At the close of each state fiscal year (June 30) computations begin on each contributing employer's tax rate for the next calendar year. This computation involves the following steps and factors:
- The difference between the total contributions paid and the total benefits charged is the account balance. This indicates an employer's actual experience with unemployment.
- Total contributions paid includes those for all prior years and for the first and second quarters of the computation year, if all payments have been received on time.
- Total benefits charged include benefits paid which have been charged against the employer's experience rating account in all prior years and during the first and second quarters of the computation year.
Average Annual Payroll
The average of the taxable payrolls for the past three calendar years immediately preceding the computation date (or past two years for some new employers who have completed only two years of liability). This figure indicates an employer's potential risk in regard to unemployment.
To obtain this percentage, the account balance is divided by the average annual payroll and the result multiplied by 100.
An employer's basic contribution rate is determined according to the Standard Rate Schedule in the law (K.S.A. 44-710a). The basic rate is then adjusted as provided in the Fund Control Table in the law which compares the total payroll with the size of the Unemployment Insurance Trust Fund.
| Account Balance X 100 = Reserve Ratio
| Average Annual Payroll
Employers with a positive balance eligible for computed rates are divided into 27 groups in accordance with the size of their reserve ratio. (A positive balanced employer has paid more contributions [UI tax] over the life of the business than the amount of benefits charged over the same period.) These employers are placed in order, or arrayed, by reserve ratio with the highest placed in rate group 1 and the lowest in rate group 27. The higher the reserve ratio, the more favorable the contribution rate.
Negative Account Balance Employers
When the benefits charged to an employer's account exceed taxes paid and credited to that account, the tax rate is based upon the employer's negative reserve ratio.
All eligible contributing employers with a negative account balance are assigned the maximum rate provided in the law of 5.4 percent and are not included in the experience rate computation described above.
In addition to the maximum rate, negative account balance employers are subject to a surcharge. The surcharge is based on the size of the employer's negative reserve ratio, with a minimum of 0.2 percent to a maximum of 2.2 percent. Therefore, the rates for negative account balance employers can range from 5.6 percent to 7.4 percent for the tax year 2015. For the tax years 2016 and higher, the range will be 5.6 percent to 7.6 percent, plus any solvency adjustment which may apply for that year.
A recaptured employer is an employer subject to the Kansas Employment Security Act that resumes paying wages after not paying wages for a period of at least one year. The Act allows employers to recapture their experience rating factors after they have re-established a new period of 24 months of eligibility for benefit charges immediately preceding the computation date of June 30. The new period begins on the date the employer resumes paying wages.
If the employer resumes paying wages in a year in which a rate has been computed, the computed rate will be used for the balance of that year. If a rate cannot be computed, the employer will be assigned the rate of rate group 27 (the highest rate). If the employer is a negative account employer, a rate of 7.4 percent will be assigned for 2015 and 7.6 percent after 2015. After a new period of 24 months in which the employer has reported wages that could be used in the computation for unemployment benefits has been established, the rates will be computed in the same manner as any other employer eligible for an experience computed tax rate.
IMPORTANT: To avoid being classified as a recaptured employer and being assigned the maximum rate, an employer must pay some wages during each calendar year.
Notification of Charges
In September of each year, form K-CNS 403, Notice of Benefit Charges, is mailed to all contributing employers. This is a statement of an employer's pro rata share of all benefit payments charged to its experience rating account during the 12-month period immediately preceding the computation date of June 30. These benefit charges will be used in the computation of the next calendar year's contribution rate. Employers should examine this notice carefully to insure its accuracy. Any questions regarding the pro rata charge of benefits, or a request for a redetermination of a benefit charge, must be made within 15 days from the mailing date of the notice. The employer's correspondence and any supporting documentation should be directed to:
Kansas Department of Labor
ATTN: Benefits Unit
401 SW Topeka Blvd.
Topeka, KS 66603-3182
Also see Section IX, Disputing a Liability Determination.
Notification of Rates
In December of each year, form K-CNS 404, Experience Rating Notice, is mailed to all contributing employers. This notice provides each employer with essential information concerning the status of the employer's experience rating account and its contribution rate for the next calendar year. The determination of the contribution rate becomes binding unless within 15 days from the mailing date of the notice the employer requests in writing a review and redetermination. This procedure is described on the back of that form.
Employers are permitted to make a voluntary contribution for the purpose of obtaining a more favorable, reduced contribution rate.
On the Experience Rating Notice each contributing employer is provided a "voluntary contribution computation." An employer may, within a 30-day period immediately following the date of mailing, make a voluntary contribution. The computation provides the employer with the exact amount necessary, however, the employer must determine if the voluntary contribution payment is beneficial to the business. Negative account balance employers may make a voluntary contribution in the amount of their negative balance and receive the rate of group 27, or the employer can make additional voluntary payments to reduce the rate to any of the remaining rate groups of groups 1 through 26. Such voluntary contributions will be credited to the employer's experience account and the experience rate for the current calendar year will be recomputed. Voluntary contributions are not refundable, nor can they be used to offset FUTA taxes.
Transfer of Employer's Experience Account
When all or part of an employer's organization, trade or business is transferred to another company, several provisions of the Kansas Employment Security Law control the transfer of the experience factors.
A mandatory transfer of a predecessor employer's experience rating factors is required whenever the successor employer has substantially common ownership, management or control of that of the predecessor employer. Some examples when mandatory transfer applies are:
- Individual owner incorporates the business and the individual is the only or the controlling corporate officer.
- A partnership incorporates and the partners are now the only corporate officers.
- One corporation is acquired by another having the same corporate officers.
When both parties to the transfer represent different interests, the successor employer may make a voluntary election within 120 days of the date of transfer to receive the predecessor experience rating factors.
When a successor acquires less than 100 percent of an employer's annual payroll and intends to continue the acquired part as an ongoing business, a partial transfer of experience rating factors can be made if:
- Both the predecessor and partial successor make written application within 120 days of the date of transfer.
- The partial successor is or becomes an employer immediately after the transaction.
Mandatory Partial Transfer
A mandatory partial transfer of a predecessor employer's experience rating factors is required when an employing unit acquires less than 100 percent of an employer's annual payroll and the partial successor employing unit has substantially common ownership, management or control of that of the predecessor employer and intends to continue the acquired portion as an ongoing business.
Any time an employer has a mandatory full or partial successorship, the contribution rate shall be recalculated and made effective on the first day of the next calendar quarter following the date of the transfer and a new account number will be assigned.
In all other successorships, when the successor already has a contribution rate applicable to the year in which the transfer occurs, that rate will remain unchanged for the year. However, the following year's rate will be based on the combined experience of the predecessor and successor. A successor establishing liability as of the date of change, electing a transfer of factors, will be assigned the rate of the predecessor for the balance of the calendar year.
Unemployment experience may not be transferred and a new employer rate (or the state's standard rate) will be assigned when a person who is not an employer acquires the trade or business of an existing employer. The prohibition applies only if the department finds that such person acquired the business solely or primarily for the purpose of obtaining a lower experience rate for their UI tax contributions. This also is known as state unemployment tax avoidance or SUTA Dumping.
SUTA dumping is manipulating unemployment tax rates to pay less in taxes. This causes harm to the UI trust fund impacting millions of dollars, adversely affects tax rates for all employers and results in an uneven playing field. Mandatory SUTA dumping is when the companies are under the same common ownership, management or control. Prohibited SUTA dumping is when a company acquires another company solely for the purpose of obtaining a lower tax rate. SUTA dumping is illegal.
The law provides civil and criminal penalties for employers attempting to manipulate their rate and other persons knowingly giving advice leading to such violations.