Both the federal and state government require most employers in the United States to pay federal and state unemployment tax, which is used to provide temporary financial benefits to qualified employees who lose their jobs. The state of New Jersey is one of the few states that requires employees to pay unemployment tax. Therefore, if you work in New Jersey, both you and your employer pay for your unemployment compensation.
The New Jersey Department of Labor and Workforce Development oversees the state’s unemployment laws. The Internal Revenue Service administrates federal unemployment tax laws. The state of New Jersey requires employers and employees to pay unemployment insurance, disability insurance and workforce development funds. Employees are also required to pay family leave insurance. Your employer makes the deduction from your paychecks and pays it -- plus his own portion -- to the state department of labor. He pays federal unemployment tax to the IRS.
Your employer’s state unemployment tax rate depends on whether he’s a new employer and his unemployment benefits history. At the time of publication, a new employer in Jew Jersey pays a tax rate of .26825 for unemployment, .005 for disability insurance and .001175 for workforce development, and the annual wage base is $29,600. Once you earn the yearly base, your employer does not owe any more tax on you for the fiscal year. New Jersey’s fiscal year runs from July 1 to June 30. The new employer rate is effective for the first three years the employer is in business. Thereafter, the department assigns a new rate based on the employer’s experience, which largely depends on the amount of benefits that have been drawn on his account.
You pay .003825 for unemployment insurance, .005 for disability insurance, .000425 for workforce development and .0006 for family leave insurance, up to the first $29,600 paid to you for the year.
If you lose your job and qualify for unemployment benefits, your weekly compensation will be 60 percent of your average weekly income throughout your base year period, up to $598. The maximum amount can vary each year. Your base year period includes 52 weeks, which depends on the date you file your claim.
Your employer pays 6 percent of the first $7,000 paid to you for federal unemployment tax. If he paid state unemployment tax as required, he can take a credit of 5.4 percent against his federal unemployment tax, which reduces the latter to .6 percent.
- IRS.gov: Publication 15
- World Health Organization. "Rolling updates on coronavirus disease (COVID-19)." Accessed April 7, 2020.
- Congress.gov. "H.R. 748—CARES Act." Accessed April 7, 2020.
- United States Department of Labor. "UNEMPLOYMENT INSURANCE PROGRAM LETTER NO. 15-20." Accessed July 1, 2020.
- Whitehouse. "Memorandum on Authorizing the Other Needs Assistance Program for Major Disaster Declarations Related to Coronavirus Disease 2019." Accessed Sep. 8, 2020.
Grace Ferguson has been writing professionally since 2009. With 10 years of experience in employee benefits and payroll administration, Ferguson has written extensively on topics relating to employment and finance. A research writer as well, she has been published in The Sage Encyclopedia and Mission Bell Media.