Employers’ General UI Contributions Information and Definitions - Unemployment Insurance

An employer is a person or governmental entity who employs at least one individual within the state (under Maryland unemployment insurance (UI) law).
Covered employment is any service performed for remuneration (payment) whether full-time or part-time, that is used as the basis for UI benefits. This includes salaries paid to corporate officers who are employees of the corporation (including close and subchapter S corporations).
When an individual performs a service for an employer in return for wages, the individual is likely covered for UI purposes. Under Maryland UI law, if an employee is engaged in covered employment, their employer is required to:

• report the employee’s wages to the Maryland Division of Unemployment Insurance (the Division). To do so, an employer must file quarterly contribution and employment reports (also referred to as wage reports or contribution reports). See Question 12, How does an employer file quarterly contribution reports?;
• pay UI taxes on those wages (or, in some circumstances, reimburse the Division for benefits charged to their accounts. See Question 6, What is a reimbursable employer (not-for-profit and government entities?, for more information; and,
• have an UI employer account assigned by the Division. See Question 2, How does an employer register for a Maryland UI employer account?, for more information.

Covered Employment Exemptions
If an individual is not engaged in covered employment, the individual’s wages are not reported to the Division and the employer does not pay UI taxes on those wages.
One of the most common covered employment exclusions is an independent contractor. The criteria for independent contractor status are:

• The individual who performs the work is free from control and direction over its performance both in fact and under the contract; and
• The individual customarily is engaged in an independent business or occupation of the same nature as that involved in the work; and
• The work is:
  
  • outside of the usual course of business of the person for whom the work is performed, or
  • performed outside of any place of business of the person for whom the work is performed.

  NOTE: When independent contractor status is in question, employers must document that all three of the criteria above are satisfied.
  An independent contractor should have the appropriate licenses, file business tax returns, and may have their own federal identification number and UI account number.

  The Code of Maryland Regulations (COMAR) provides additional guidance for making the proper determination regarding workers.

  Individuals who work in the positions listed below are exempt from covered employment (under Labor and Employment Article 8 of the Maryland Annotated Code) when certain criteria are met:

  • Barbers and Beauticians
  • Taxicab Drivers
  • Owner Operated Tractor Drivers In Certain E & F Classifications
  • Maritime Employment
  • Election Workers
  • Church Employees
  • Clergy
  • Certain Governmental Employees
  • Railroad Employment
  • Newspaper Delivery
  • Insurance Sales
  • Real Estate Sales
  • Messenger Service
  • Direct Sellers
  • Foreign Employment
  • Other State Unemployment Insurance Programs
  • Work-Relief and Work-Training
  • Family Members
  • Hospital Patients
  • Student Nurses or Interns
  • Yacht salespersons who work for a licensed trader on solely a commission basis
  • Services of aliens who are students, scholars, trainees, teachers, etc., who enter the U.S. solely to pursue a full course of study at certain vocational and other non-academic institutions.
  • Recreational Sports Officials
  • Home Workers
  • Casual Labor

  Casual labor is defined as work performed that is not in the course of the employer’s trade or business and which is occasional, incidental or irregular. Do not confuse casual labor with temporary or part-time employment, which is taxable. However, if the:

  • cash remuneration for casual labor is $50 or more during a calendar quarter, and
  • casual labor is performed by an individual who is regularly employed by the employer (on some portion of 24 days during the calendar quarter or the preceding calendar quarter) the service is covered employment, and remuneration is taxable under the law.

  2. How does an employer register for a Maryland UI employer account?

  You can open a Maryland unemployment insurance employer account either by:

  • going to the BEACON employer login webpage, selecting “Register for an Account,” and following the prompts; or,
  • filing a Combined RegistrationApplication (CRA). Employers should submit a Combined Registration Application no later than 20 days after the first day of business.

  The CRA covers obligations to seven state agencies. You should only complete sections that apply to your business. You may file the application online, by fax at 410-260-7908, or submit the completed form by mail to:

  Comptroller of Maryland
  Revenue Administration Center
  110 Carroll Street
  Annapolis, MD 21411-0001

  You may be required to file using a specific method when applying for certain business tax accounts or licenses. Please review the filing instructions online before beginning the CRA.
  The Division will establish an account for the employer and assign a 10-digit UI employer account number.

  3. Are agricultural employers, domestic employers, or farm crew leaders required to meet UI obligations?

  • Agricultural Employer - An agricultural employer is liable to pay UI taxes if, during any calendar quarter of the current or preceding year, the employer:
    • paid $20,000 or more to individuals performing agricultural labor; or
    • employed at any time 10 or more individuals for a portion of a day in any 20 weeks in the current or preceding calendar year.
    • Domestic Employer - A domestic employer is liable to pay UI taxes if:
      • during any calendar quarter of the current or preceding calendar year, there is a total payroll of $1,000 or more to an individual(s) performing domestic service.
      • NOTE: A domestic employer is a person who has a worker in their home, working full or part-time.
        
      • a crew leader holds a valid certificate of registration under the Farm Labor Contractor Registration Act of 1963; or
      • the crew leader provides mechanized equipment which substantially all the individuals operate or maintain (provided the individuals are not employees of another employer).

      Agricultural employers, domestic employers, and farm crew leaders are required to meet Maryland’s UI obligations for employers (such as filing quarterly contribution and employment reports each calendar quarter, registering for a Maryland UI employer account, reporting new hires and rehires, etc.). To learn more about employer UI obligations, see Information for New Employers webpage and the Employers’ Quick Reference Guide. For more information about registering, see Question 2, How does an employer register for a Maryland UI employer account?
      NOTE: Agricultural or domestic employers, or farm crew leaders, are not required to pay UI taxes if they do not meet the criteria included above.

      4. What is the Maryland State Directory of New Hires?

      Employers who are covered under the Maryland unemployment insurance law are required to report all employees who are hired or rehired to the Maryland State Directory of New Hires within 20 days of the employee's first day of work. See Question 1, What is the definition of employer and what is covered employment?, for information about covered employment.
      Employers can report hires and rehires to the Maryland State Directory of New Hires:

      • online, or
      • by sending completed new hire reports
        • by fax to 410-281-6004, toll-free fax to 1-888-657-3534 or
        • by mail to:
          Maryland State Directory of New Hires
          P.O. Box 1316
          Baltimore, MD 21203-1316

        Employers are required to report the following information:

        • Employee's name and Social Security number
        • Employee's home address
        • Employee's first physical day of work on the job
        • Employer's name and address
        • Maryland Unemployment Insurance Employer Account Number
        • Federal Employer Identification Number
        • Whether health insurance is available.

        For more information, contact the Maryland State Directory of New Hires at 410-281-6000 or 1-888-MDHIRES, fax at 410-281-6004, or toll-free at 1-888-657-3534.

        Tax Rate Assignments and Reimbursable Employers

        5. How are my tax rates determined?

        Maryland contributory employers are assigned one of three different types of tax rates: the new account rate, the standard rate, or the experience (earned) rate.
        NOTE: A contributory employer pays quarterly UI taxes, which are based on the benefits charged against the employer’s account and the taxable wages the employer reported to the Division.

        • New Account Rate
          The new account rate is assigned to an employer that does not qualify for an experience (also called earned) rate. The tax rate for a new employer will be the average of the rates for all employers in the state during the last five years.
          Construction companies headquartered in another state will be assigned a tax rate that is the average of the rates for all construction employers in Maryland during the year for which the rate is assigned.
        • Experience (Earned) Rate
          The experience (also called an earned) rate is assigned after an employer has paid wages to employees in two rating years (July 1 to June 30) prior to the computation date (July 1st prior to the rated year). The experience rate reflects an employer’s own experience with layoffs.
          If the employer's former employees receive benefits regularly which result in benefit charges, the employer will have a higher tax rate.
          The experience rate is determined by finding the ratio between the benefits charged to your account and the taxable wages that you reported in three fiscal years prior to the computation date.

        If an employer has only been in business for two fiscal years prior to the computation date, just the experience in those two years is used. The benefit ratio is then applied to the Tax Table in effect for the year.

        6. What is a reimbursable employer (not-for-profit and government entities)?

        Not-for-profit organizations (classified under Section 501(c)(3) and exempt from income tax under Section 501(a) of the Internal Revenue Code) and state and local government entities and subdivisions may elect to reimburse the state dollar for dollar for benefits charged against their accounts, in lieu of paying quarterly UI taxes. Not-for-profit organizations are required to post a bond of a specific dollar amount.
        Qualifying new not-for-profit organizations and government entities must make their election in writing to the Division within 30 days of coverage.

        • A qualifying employer can request to be a reimbursable employer when they register for a Maryland UI account in BEACON. Not-for-profit organizations must provide a 501(c)(3) exemption letter to be considered for reimbursing status.
          
          • For registration instructions, see the Employer Registration video.

          After a qualifying new employer selects a reimbursement method, the employer can only request to change their method after two years, on written notice to the Division. The request must be submitted at least 30 days before the January 1 of the year that the new method will become effective (if approved). For example, if the new method is to take effect on January 1, 2023, the employer’s request must be submitted before December 1, 2022.
          Reimbursable employers receive a Statement of Reimbursable Benefits Paid correspondence to bill them for benefits charged against their accounts. This quarterly statement lists all claimants who collected benefits during the previous quarter (a claimant refers to an individual who files a claim for UI benefits). Employers who receive this form have 15 days from the date of invoice to file a written protest (information about filing a written protest is included on the employer’s Statement of Reimbursable Benefits Paid). Interest is charged for any late payments.

          Benefit Charges and Taxable Wages

          7. How are benefits charged to my employer account?

          The reason the individual separated from employment and the wages the employee earned during a specific time period (the base period) impact an employer’s benefit charges.

          • See the Employers’ Quick Reference Guide for more information on the base period.

          The gross wages paid to a claimant by all employers in the base period are used in determining a UI claimant's weekly benefit amount (WBA). An employer's percentage of charging for UI benefits is based on the following elements:

          • Base Period Gross Wages Paid by the Employer - The wages a claimant earned in the standard base period (the first four of the last five completed calendar quarters prior to the filing of the claim) are used to establish the claimant’s eligibility for benefits. If the claimant does not qualify under the standard base period, the wages the claimant earned in an alternate base period (the four most recently-completed calendar quarters prior to the filing of the claim) may be used.
            
          • Percent of Liability - If a claimant has only one employer in the base period, the employer's account would be charged for 100% of any benefits paid and chargeable. If the claimant had two or more employers during the base period, all employer charges are prorated based proportionately on the wages the employer paid to total wages paid. The percentage of charges is rounded to the nearest hundredth part for each base period employer.
            The percentage, multiplied by the total amount of benefits ultimately received by the claimant while employed, equals your benefit charges. You are notified of the exact amount of charges at the end of each calendar quarter.

          Benefits charged to your account will usually increase your tax rate and will result in higher tax payments. Of course, the best way to minimize unemployment insurance costs is to avoid layoffs.

          You may be eligible to participate in the Work Sharing unemployment insurance program, which allows employers to temporarily reduce employees’ hours, instead of a complete layoff. For more information, see the Work Sharing webpage.

          8. Are there circumstances in which an employer is not charged for UI benefits? Can an employer receive a credit if the claimant must repay the UI benefits?

          In some circumstances (listed below), Maryland employers are not charged for UI benefits or receive credits for repayments. However, when an employer is not charged, it does not mean a claimant is ineligible for UI benefits. Except for number 7 below, the non-charging provisions are not applicable to reimbursable employers.
          The list below includes reasons for non-charging and credit provisions:

          1. Voluntary quit without good cause attributable to the employment.
          2. Voluntary quit for a better job.
          3. Voluntary quit to attend approved training.
          4. Discharge for reasons which constitute gross misconduct in connection with the work.
          5. Discharge for reasons which constitute aggravated misconduct in connection with the work.
          6. If the claimant is originally granted and paid benefits, but as a result of a redetermination or an appeal is later disqualified, a credit will be given, except to reimbursing employers, for benefits paid prior to the redetermination or the appeal decision. Credits will only be given to reimbursing employers when the claimant repays any benefits improperly paid. Subsequent benefits will only be charged if the claimant resolves the disqualification and the benefits are otherwise payable.
          7. Part-time/full-time employment - If a claimant loses a full-time job, but continues to work a part-time job, partial benefits received by the claimant will not be charged to the part-time employer's account as long as the claimant remains actively employed. An employer who receives a Request for Separation Information correspondence for a claimant who is actively working part-time should clearly indicate the claimant's continued part-time status.

          9. Which employee wages are taxable for UI purposes?

          Taxable wages include the total remuneration paid up to the taxable wage base limit of $8,500 before any deductions are made.
          The following wages are taxable:

          • Meals and lodging provided by an employer to an employee, unless the meals and lodging are provided on the employer's premises for the employer's convenience.
          • Tips which are reported pursuant to Section 6053 of the Internal Revenue Code.
          • Payments to workers for:
            • dismissal;
            • vacations;
            • sick leave (for first six months only); and,
            • advances to employees for travel or other expenses for which no accounting or reporting to employers is required.

            NOTE: The Federal Unemployment Tax Act (FUTA) taxable wage base remains unchanged at $7,000.
            The following wages are not to be reported:

            • Value of any special discount or markdown allowed to a worker on goods or services purchased from or supplied by the employer where such purchase is optional with the worker.
            • Payments toward retirement or a death benefit if the employee has no right to receive cash instead, or to assign the employee’s rights therein, or to receive a cash payment in lieu thereof on withdrawal from, or termination of such insurance plan or upon termination of employment.
            • Facilities or privileges (such as entertainment, cafeterias, restaurants, medical services, or so-called courtesy discounts on purchases) furnished or offered by an employer merely as a convenience to the worker or as a means of promoting health, goodwill, or efficiency among workers.
            • Discounts on property or security purchases.
            • Customary and reasonable directors' fees.
            • Supper money given to a worker to compensate the employee for the additional cost of a meal made necessary by working overtime.
            • Payments by the employer to or on behalf of an employer for sickness or accident disability after the expiration of six calendar months.
            • Wages of a sole proprietor, the sole proprietor’s spouse, children of the sole proprietor under 21 years old, and the sole proprietor’s parents.
            • Wages of partners.
              • If a partnership consists exclusively of spouses, then their children under 21 years old who are employed by the partnership are not engaged in covered employment.

              10. How do I calculate excess wages for the quarterly contribution report?

              An employer pays taxes on the first $8,500 of wages paid to an employee in the calendar year. Examples of how to calculate excess wages are listed below:

              • If an employee earned exactly $8,500 in the first quarter of the calendar year, the employer would have zero excess wages in the first quarter because the entire amount of wages is taxable.
              • If the same employee earned $7,000 in the second quarter of the same calendar year, the amount of excess wages in the second quarter would be $7,000 because the employer had paid taxes on the first $8,500 in the first quarter.

              Apply this calculation to all employees to determine excess wages for each employee, and then add the excess wages for all employees. This grand total is entered as excess wages for your filing. For additional help computing excess wages, see the Excess Wage Calculator spreadsheet.

              11. What if an employer has employees working in several states?

              Services performed within Maryland or both within and outside of Maryland, are to be reported to the Division if:

              • The service is localized in Maryland; or,
              • When there is employment in multiple states and some service is performed in the state where the base of operations is located, then the earnings are to be reported to that state where the individual's base of operations is located.
                • If no services are performed in the state with the base of operations and some services are performed in the state where direction or control is received, then the earnings are to be reported to the state where the individual's direction or control is received.
                • If there are no services performed in the state where the base of operations is located or where direction or control is received, then the individual's state of residence is to be used.

                The objective is for all services performed by an individual for a single employer to be covered under one state law, wherever the services are performed. Employers may elect to cover an employee through a reciprocal coverage agreement between states.
                Under a reciprocal coverage agreement, services that an individual performs in multiple states for a single employing unit are considered to be performed entirely in one state. This can be a state in which:

                • the employee performs services;
                • the employee resides; or
                • the employer maintains a place of business.

                Filing Quarterly Contribution Reports and Paying UI Taxes

                12. How does an employer file quarterly reports?

                Maryland employers are required to report the amount of total gross wages paid and pay unemployment insurance taxes each calendar quarter.
                Instructions for filing a quarterly contribution and employment report (also called a contribution report or wage report) in BEACON are available in the Employer Submit Wage Report tutorial video.

                • Gross wages include all remuneration for personal services, including commissions and bonuses, and the cash value of all compensation in any medium other than cash.
                • Employers must also calculate and report the amount of total taxable wages. For Maryland unemployment insurance purposes, taxable wages are defined as the first $8,500 earned by each employee in a calendar year.

                You have one month following the end of each quarter to file reports and pay the tax. You must file on time in order to:

                • Receive maximum credit for your state payments against Federal Unemployment Tax Act (FUTA) payments;
                • Receive credit for your payroll in experience rating; and,
                • Avoid interest charges at a rate of 1.5% per month for late payments and a penalty assessment of $35 for each late report.

                13. How can an employer pay unemployment insurance taxes?

                Maryland employers are required to pay their unemployment insurance taxes by the quarterly due date, four (4) times each year. For employers filing in the BEACON system:

                • Pay by E-Check (free) at the time of the filing, through BEACON
                • Pay by paper check and mail to P.O. Box 17291 Baltimore, MD 21297-0365
                • Pay by ACH Credit after obtaining approval from the Maryland Department of Labor by using the Electronic Funds Transfer Guide.

                NOTE: You may view the payments you have made in the BEACON system by selecting “Payments” from your portal’s left menu, and then selecting “Payment History.”
                For detailed information about employer tax rates, see the Annual Tax Rate and Benefit Charge Information webpage and the UI Tax Rate Information for Employers presentation.

                Experience Transfer and SUTA Dumping

                14. What happens when an employer transfers its experience rating?

                Frequently, an employer will acquire a business from a previous owner or the employer will reorganize their business. The effect of various transactions on the employer’s contribution rate are summarized below:

                • New Employing Unit Acquired Business - When a new business entity is formed and it acquires assets, employees, business, organization, or trade from another employer, the new business entity is classified as a successor employer. If there is any common ownership, management or control between the successor employer and the former employer (predecessor), the predecessor’s tax rate and experience rating is transferred to the successor. If there is no common ownership, management or control with the predecessor employer, no experience rating is transferred and the new business entity is assigned the new account rate.
                • CommonOwnership - There is common ownership, management or control when any person serves in any of the following positions for both the predecessor and successor:
                  • Sole proprietor (includes spouse, children and parents of sole proprietor);
                  • Partner of a partnership;
                  • Member of a limited liability company;
                  • Chief Executive Officer;
                  • Chief Financial Officer;
                  • Any corporate officer; or
                  • Any shareholder owning, directly or indirectly, more than 50% of a corporation’s stock.

                  Taxable Wage Calculation - When calculating taxable wages in the year of the acquisition, a successor employer that assumed the experience rating of a predecessor should make the calculation for each employee based on wages paid to the employee by both the predecessor and successor. If a successor employer does not assume the experience rating of the predecessor because there is no common ownership, management or control with the predecessor, the successor may not compute taxable wages based on wages paid by the predecessor.

                  See Question 10 (How do I calculate excess wages for the quarterly contribution report?) for more information regarding the taxable wage calculation.

                  • the employer acquires less than 50% of the employees of the predecessor employer;
                  • the predecessor continues to pay wages to the remaining employees after the acquisition of employees in the quarter following the acquisition of employees by the employer; and
                  • other than the transfer of workforce, the employer does not acquire any tangible or intangible assets from the predecessor employer.

                  Taxable Wage Calculation - When calculating the amount of taxable wages for the quarterly contribution report, a new employer or existing employer which is not classified as a successor employer must compute taxable wages for each employee (based on wages that it paid and not on wages paid by any previous employer).

                  See Question 10 (How do I calculate excess wages for the quarterly contribution report?) for more information regarding the taxable wage calculation.

                  • a civil penalty of not more than $5,000.
                  • conviction of a misdemeanor. On conviction, the person would be subject to imprisonment for up to one (1) year, a fine not exceeding $10,000, or both.

                  Complete the Business Transfer Report in order to report the transfer of workforce/payroll from one business entity to another business entity.

                  For additional information regarding employer rates, contact the Experience Rate Unit at 410-767-2413 or toll free at 1-800-492-5524.

                  15. What is SUTA dumping?

                  SUTA is an acronym for State Unemployment Tax Act, and dumping refers to the unlawful actions of an employer to pay at a lower unemployment insurance tax rate than should be assigned based on the employer’s experience with layoffs and payrolls. Most frequently, it involves merger, acquisition or restructuring schemes, especially those involving the shifting of workforce/payroll from one business entity to another.
                  Penalties include a higher unemployment insurance tax rate, monetary fines and even imprisonment. To avoid SUTA dumping penalties, please voluntarily notify the Division via the Business Transfer Report when workforce/payroll is shifted from one business entity to another and provide any requested information to the Division.

                  Appeals, BEACON UI System

                  16. How can an employer file an appeal?

                  Employers can appeal a liability determination, a benefit charge, or a tax rate assignment in writing within 15 days of the decision. Follow instructions indicated on the forms you receive to determine how to submit your appeal.
                  The employer should include in the protest or appeal the employer's name, the employer's account number, the name and title of the individual submitting the protest, the date of the protest, and most importantly, the specific factual reason for the protest or appeal. The employer should attach any documentation that supports their contention. The Division of Unemployment Insurance will respond to the employer's protest by issuing a Review Determination.

                  17. Can I get information about my employer account online?

                  The BEACON system is your secure source for online employer information. You can use BEACON to:

                  • File and pay your taxes online
                  • File quarterly wage reports
                  • View benefit charge statements and annual tax rate information
                  • File appeals
                  • Provide separation information
                  • Manage powers of attorney
                  • Make account updates, and much more.

                  You will need to activate your account in BEACON before logging in. Please visit the BEACON Account Activation and Registration for Employers and Third-Party Agents webpage for additional information.

                  For more information about using BEACON, see the BEACON Employer FAQs.

                  18. How does an employer change its address with the Division?

                  You may change your address online in BEACON. To do so, select “Account Maintenance” from your portal’s left menu, select “Employer Maintenance”, and add or modify an address under the Address Summary tab. For detailed instructions, see the Employer Account Maintenance BEACON tutorial video.

                  19. How can I ask questions or learn more about UI for employers?

                  If you have questions about any of the topics included on this webpage, contact the Division’s Employer Call Center at 410-949-0033 or toll free at 1-800-492-5524.
                  For more information about employer unemployment insurance obligations in Maryland, see:

                  • Employers’ Quick Reference Guide,
                  • Information for New Employers,
                  • FAQs for Employers and Third-Party Agents, and
                  • Flyers, Forms, and Publications for Employers & Third Party Agents.

                  Maryland Department of Labor
                  1100 North Eutaw Street, Baltimore, MD 21201
                  Dial 7-1-1 to place a call through Maryland Relay