Along with Medicare and Social Security taxes, employers must pay unemployment taxes on behalf of employees. Federal unemployment taxes, or FUTA, fund the federal unemployment insurance program. State unemployment taxes, or SUTA, fund a state unemployment benefit program. Most employers pay SUTA taxes on a quarterly basis.
Businesses with employees must apply for a state unemployment tax account with their state. After a business applies for an account, the state determines the rate of state unemployment tax the employer must contribute for each employee. Exact rates vary depending on the state, the industry, the length of time the company has been in business and the amount of unemployment claims past employees of the business have filed. In general, a newer business with higher claim rates will pay a higher rate compared with established businesses with fewer historical claims.