Taxable Wage Base

What is a taxable wage base?

Contributing employers covered under the Michigan Employment Security (MES) Act are required to pay unemployment insurance taxes on their employees' wages. The taxable wage base is the amount of an employee's wages that is taxed by the Unemployment Insurance Agency each calendar year and is payable by the employer.

How much is the taxable wage base?

The taxable wage base is $9,000 for qualified employers. The MES Act provides for a reduced taxable wage base if the UIA Trust Fund balance reaches or exceeds $2.5B on June 30 of the prior year and is forecast to remain above $2.5 billion for the following quarter.

What does this mean for my business?

Contributing employers must pay taxes on the first $9,000 of each employee’s calendar year wages. The MES Act provides for a reduced taxable wage base if the UIA Trust Fund balance reaches or exceeds $2.5B on June 30 of the prior year and is forecast to remain above $2.5 billion for the following quarter.

Will the $9,000 taxable wage base be reflected in my tax account when my quarterly reports are filed?

Yes. The correct taxable wage base will be reflected in your tax account at the time your quarterly wage/tax reports are filed.

How does the taxable wage base affect my organization's unemployment tax liability?

Delinquent employers do not qualify for the taxable wage base reduction to $9,000. On average, a new employer with a tax rate of 2.7% will save $14.00 per employee with the lower taxable wage base. A lower taxable wage base is triggered when the unemployment insurance Trust Fund balance is at or above $2.5 billion on June 30 and the next calendar quarter.

I am a third-party payroll provider. Does the change in the taxable wage base mean I may have to make internal programming changes to my system?

Yes. You will need to ensure that the applicable taxable wage for the respective year is set at $9,000 to ensure qualified employers pay the correct amount of taxes to avoid any interest accrual due to underpayments.

Should employers calculate taxable wages before or after benefits (for example, like health insurance)?

Taxable wages are calculated after benefits, like health Insurance. It is considered as part of the employer gross wages.

If these are fringe benefits paid by the employer, then they must not be reported as part of the gross wages since they are exempt for unemployment insurance tax purposes.

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Taxable Wage Base