New employers who do not acquire an existing business start at a tax rate of 2.70% or the applicable industry average tax rate, whichever is higher. The industry average is based on the North American Industry Classification System (NAICS). The employer will keep the entry level tax rate for approximately 18 months, and will continue to pay at this rate until the employer’s account is chargeable with claims for unemployment benefits for four complete quarters. This period generally extends six calendar quarters from the date that first wages are paid, but can be as long as eight quarters. At the end of this period and for each year thereafter, the employer’s tax rate is computed based upon the amount of unemployment insurance benefits former employees receive along with a number of statewide factors. This computed rate is called the employer’s Effective Tax Rate.

 

Sum of General Tax Rate + Replenishment Tax Rate + Employment and Training Investment Assessment + Obligation Assessment Rate for 2007.

 

Note: Prior years could also include Deficit Tax Rate. 

General Tax Rate - This rate is based on unemployment insurance claims charged to your account, and is the product of a Statewide multiplier called the Replenishment Ratio and your Benefit Ratio, multiplied by 100% and rounded up to the next tenth. The Replenishment Ratio is calculated each year based on total benefits paid Statewide for a four-quarter period. The Benefit Ratio is the total of your chargebacks of unemployment benefits paid to your former employees for the three years prior to the rate computation date divided by your employees’ taxed wages for the same period. The ratio is multiplied by 100% and rounded up to the next hundredth. Change in an employer’s general tax rate is directly related to staff patterns and restructuring to adjust to the market place. If you have claims against your account, you may find it beneficial to “buy down” the tax rate. For more information, please visit the Voluntary Contribution Analysis where you will find a handy way to calculate a “buy down” and evaluate the return on the up-front investment.

 

It is important to note that the Commission can use in the calculation of the Benefit Ratio only taxed wages on which the tax due has been paid by the end of the month of the computation date. It is especially important for employers with chargebacks of benefits to pay their tax timely to divide the chargeback total by the largest possible taxed wage total.

 

Replenishment Tax Rate – This is a tax based on Statewide benefits and taxed wages and is applicable to all employers to cover unemployment claims not charged to a specific employer. This tax varies inversely from year to year, to statewide economic conditions.

 

Obligation Assessment Rate – The Texas Legislature granted TWC the authority to finance shortfalls in the unemployment compensation Fund, the fund from which UI benefits are paid, with alternative borrowing options including bonds. Rather than borrowing from the Federal government, TWC sold bonds to finance the gap in the Unemployment Compensation Fund. This option accomplished three important things: First, large fluctuations in tax rates are minimized. Second, by maintaining a mandated minimum balance in the Fund, the Deficit Tax is avoided. Third, by borrowing the money through the bonding option over time, significant savings can be realized through the difference in the interest rate on bonds and the internal rate of return of dollars in the hands of business.

 

Deficit Tax Rate – This tax is calculated by multiplying the statewide Deficit Ratio by the sum of your prior year’s General, Deficit and Replenishment Tax Rates. The product is rounded to the nearest hundredth and may not exceed 2.00%. The Deficit Tax applies only to those employers who were experience rated in the previous year. A Deficit Tax was assessed in 2002 and 2003.

 

Employment and Training Investment Assessment – The rate of 0.10% is set according to State Law and is the same for each employer entitled to an experience rate.

 

An employer’s annual tax rate may be reduced by making a voluntary contribution to decrease the chargeback total used in the tax rate computation. If you have chargebacks, a Voluntary Contribution Election Form (Form C-24) must be completed and submitted along with the desired payback amount. Voluntary Contribution election forms are provided each year along with the annual Tax Rate Notice (Form C-22). Annual rate notices for the forthcoming year are mailed in mid December of the prior year.  You may use the Voluntary Contribution Analysis to determine if you should make an election to achieve your desired computed tax rate.

 

Here is some general information regarding Voluntary Contributions: 

  

A detailed listing of the individuals making up the three-year total of benefit chargebacks used in your Benefit Ratio may be viewed online by registering for access to the Employer Tax Information Online System or by: 

If you have a question about an individual chargeback claim, include your account number, the claimant’s social security number and the initial claim date, and send the request to: