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Temporary change could alter MN employers’ unemployment tax rates

When employers lay off a lot of workers, they pay more money into the state unemployment insurance fund.

That’s an incentive to keep workers on the job, Steve Grove, commissioner of the Department of Employment and Economic Development told a House committee Wednesday.

He said the pandemic has made it impossible for DEED to determine for every employer in the state which layoffs in 2020 were due to COVID-19 and which were not, and, therefore, which layoffs would be used to calculate an employer’s unemployment insurance tax rate.

The House Workforce and Business Development Finance and Policy Committee approved HF135, which would spare DEED that impossible task.

Sponsored by Rep. Mohamud Noor (DFL-Mpls), the committee chair, the bill would modify the period used to calculate an employer’s unemployment tax rate for calendar year 2021 by skipping the year altogether and temporarily using the employer’s average layoff rates for the past four years.

The bill was sent to the House Floor. The companion, SF192, sponsored by Sen. Eric Pratt (R-Prior Lake), awaits action by the Senate Jobs and Economic Growth Finance and Policy Committee.

An employee’s unemployment tax rate is determined by his or her “experience rating,” Grove said. Generally speaking, the experience rating increases the more workers an employer lays off.

“Experience ratings during a pandemic are impossible to decouple from normal times,” Grove said.

He explained that the bill would make an employer’s 2021 experience ratings effectively unchanged from calendar year 2020.

The change would not affect calculations beyond this calendar year, Grove said, adding that this is the best solution to deal with this issue caused by “a once-in-a-century pandemic.”

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