Employers’ General UI Information and Definitions - Unemployment Insurance

What is the definition of employer and what is covered employment?
How does an employer register for a Maryland UI employer account?
Are agricultural employers, domestic employers, or farm crew leaders liable for UI purposes?
What is the Maryland State Directory of New Hires?
How are my tax rates determined?
What is a reimbursable employer (not-for-profit and government entities)?
How are benefits charged to my employer account?
Are there circumstances in which an employer is not charged for UI benefits? Can an employer receive a credit if the claimant must repay the UI taxes?
Which employee wages are taxable for UI purposes?
What if an employer has employees working in several states?
How does an employer file quarterly reports?
How can an employer pay unemployment insurance taxes?
What happens when an employer transfers its experience rating?
What is SUTA dumping?
How can an employer file an appeal?
Can I get information about my employer account online?
How can I ask questions or learn more about UI for employers?

Employer UI Obligations and Accounts

1. What is the definition of employer and what is covered employment?

An employer is a person or governmental entity who employs at least one individual within the state (under Maryland unemployment insurance (UI) law).

Covered employment is any service performed for remuneration (payment) whether full-time or part-time, that is used as the basis for UI benefits. This includes salaries paid to corporate officers who are employees of the corporation (including close and subchapter S corporations).
When an individual performs a service for an employer in return for wages, the individual is likely covered for UI purposes. If an employee is engaged in covered employment, their employer is required to:

report the employee’s wages to the Maryland Division of Unemployment Insurance (the Division). To do so, an employer must file quarterly contribution and employment reports (also referred to as wage reports or contribution reports). See Question 11, How does an employer file quarterly contribution reports?;

pay UI taxes on those wages (or, in some circumstances, reimburse the Division for benefits charged to their accounts. See Question 6, What is a reimbursable employer (not-for-profit and government entities?, for more information; and,

have an UI employer account assigned by the Division. See Question 2, How does an employer register for a Maryland UI employer account?, for more information.

Covered Employment Exemptions

If an individual is not engaged in covered employment, the individual’s wages are not reported to the Division and the employer does not pay UI taxes on those wages.

One of the most common covered employment exclusions is an independent contractor. The criteria for independent contractor status are:

The individual who performs the work is free from control and direction over its performance both in fact and under the contract; and
The individual customarily is engaged in an independent business or occupation of the same nature as that involved in the work; and
The work is:

outside of the usual course of business of the person for whom the work is performed, or
performed outside of any place of business of the person for whom the work is performed.

NOTE: When independent contractor status is in question, employers must document that all three of the criteria above are satisfied.

The Code of Maryland Regulations (COMAR) provides additional guidance for making the proper determination regarding workers.

Individuals who work in the positions listed below are exempt from covered employment (under Labor and Employment Article 8 of the Maryland Annotated Code) when certain criteria are met:

Barbers and Beauticians
Taxicab Drivers
Owner Operated Tractor Drivers In Certain E & F Classifications
Maritime Employment
Election Workers
Church Employees
Clergy
Certain Governmental Employees
Railroad Employment
Newspaper Delivery
Insurance Sales
Real Estate Sales
Messenger Service
Direct Sellers
Foreign Employment
Other State Unemployment Insurance Programs
Work-Relief and Work-Training
Family Members
Hospital Patients
Student Nurses or Interns
Yacht salespersons who work for a licensed trader on solely a commission basis
Services of aliens who are students, scholars, trainees, teachers, etc., who enter the U.S. solely to pursue a full course of study at certain vocational and other non-academic institutions.
Recreational Sports Officials
Home Workers
Casual Labor

Casual labor is defined as work performed that is not in the course of the employer’s trade or business and which is occasional, incidental or irregular. Do not confuse casual labor with temporary or part-time employment, which is taxable. However, if the:

cash remuneration for casual labor is $50 or more during a calendar quarter, and
casual labor is performed by an individual who is regularly employed by the employer (on some portion of 24 days during the calendar quarter or the preceding calendar quarter) the service is covered employment, and remuneration is taxable under the law.

2. How does an employer register for a Maryland UI employer account?

You can open a Maryland unemployment insurance employer account either by:

going to the BEACON employer login webpage, selecting “Register for an Account,” and following the prompts; or,
filing a Combined Registration Application (CRA). Employers should submit a Combined Registration Application no later than 20 days after the first day of business.

The CRA covers obligations to seven state agencies. You should only complete sections that apply to your business. You may be required to file using a specific method when applying for certain business tax accounts or licenses. Please review the filing instructions online before beginning the CRA.

3. Are agricultural employers, domestic employers, or farm crew leaders required to meet UI obligations?

Agricultural Employer - An agricultural employer is liable to pay UI taxes if, during any calendar quarter of the current or preceding year, the employer:

paid $20,000 or more to individuals performing agricultural labor; or
employed at any time 10 or more individuals for a portion of a day in any 20 weeks in the current or preceding calendar year.

Domestic Employer - A domestic employer is liable to pay UI taxes if:

during any calendar quarter of the current or preceding calendar year, there is a total payroll of $1,000 or more to an individual(s) performing domestic service.
NOTE: A domestic employer is a person who has a worker in their home, working full or part-time.

Farm Crew Leader - A farm crew leader is liable to pay UI taxes if:

a crew leader holds a valid certificate of registration under the Farm Labor Contractor Registration Act of 1963; or
the crew leader provides mechanized equipment which substantially all the individuals operate or maintain (provided the individuals are not employees of another employer).

Agricultural employers, domestic employers, and farm crew leaders are required to meet Maryland’s UI obligations for employers (such as filing quarterly contribution and employment reports each calendar quarter, registering for a Maryland UI employer account, reporting new hires and rehires, etc.). To learn more about employer UI obligations, see Information for New Employers webpage and the Employers’ Quick Reference Guide.

4. What is the Maryland State Directory of New Hires?

Employers are required to report all employees who are hired or rehired to the Maryland State Directory of New Hires within 20 days of the employee's first day of work through one of the following methods:

online, or
by sending completed new hire reports

by fax to 410-281-6004, toll-free fax to 1-888-657-3534 or
by mail to:
Maryland State Directory of New Hires
P.O. Box 1316
Baltimore, MD 21203-1316

Employers are required to report the following information:

Employee's name and Social Security number
Employee's home address
Employee's first physical day of work on the job
Employer's name and address
Maryland Unemployment Insurance Employer Account Number
Federal Employer Identification Number
Whether health insurance is available.

For more information, see the Maryland State Directory of New Hires webpage.

Tax Rate Assignments and Reimbursable Employers

5. How are my tax rates determined?

Maryland contributory employers are assigned one of three different types of tax rates: the new account rate, the standard rate, or the experience (earned) rate.

NOTE: A contributory employer pays quarterly UI taxes, which are based on the benefits charged against the employer’s account and the taxable wages the employer reported to the Division.

New Account Rate

The new account rate is assigned to an employer that does not qualify for an experience (also called earned) rate. The tax rate for a new employer will be the average of the rates for all employers in the state during the last five years.

Construction companies headquartered in another state will be assigned a tax rate that is the average of the rates for all construction employers in Maryland during the year for which the rate is assigned.
Experience (Earned) Rate

The experience (also called an earned) rate is assigned after an employer has paid wages to employees in two rating years (July 1 to June 30) prior to the computation date (July 1st prior to the rated year). The experience rate reflects an employer’s own experience with layoffs.

The experience rate is determined by finding the ratio between the benefits charged to your account and the taxable wages that you reported in three fiscal years prior to the computation date.

If an employer has only been in business for two fiscal years prior to the computation date, just the experience in those two years is used. The benefit ratio is then applied to the Tax Table in effect for the year.

The table in use for a particular calendar year is determined by measuring the ability of the Maryland UI Trust Fund to pay benefits in the future. There are six (6) tables, ranging from the lowest (A) to the highest (F). See the UI Tax Rate Information for Employers presentation for more information.
Standard Rate

The standard rate is assigned when an employer is eligible for an earned rate, but has no taxable wages in a fiscal year (July 1 to June 30) because the employer failed to file quarterly tax and wage reports. The standard rate is the highest rate from the Table of Rates that is in effect for the year.

For detailed information about employer tax rates, see the Annual Tax Rate and Benefit Charge Information webpage and the Unemployment Insurance Tax Rates webpage.

6. What is a reimbursable employer (not-for-profit and government entities)?

Not-for-profit organizations (classified under Section 501(c)(3) and exempt from income tax under Section 501(a) of the Internal Revenue Code) and state and local government entities and subdivisions may elect to reimburse the state dollar for dollar for benefits charged against their accounts, in lieu of paying quarterly UI taxes. Not-for-profit organizations are required to post a bond of a specific dollar amount.

Qualifying new not-for-profit organizations and government entities must make their election in writing to the Division within 30 days of coverage.

A qualifying employer can request to be a reimbursable employer when they register for a Maryland UI account in BEACON or on the Combined Registration Application (CRA). Not-for-profit organizations must provide a 501(c)(3) exemption letter to be considered for reimbursing status.

After creating a Maryland UI account and selecting a reimbursement method, an employer has 30 days to change their method, if the employer feels they chose the wrong method initially.

After 30 days, a reimbursable employer must wait one year to change the reporting type. A contributory employer (who is eligible to be reimbursable), must wait two years to request a change. If approved, the change will take effect on January 1 of the next year. Employers can request a change via:

BEACON (select Account Maintenance from the left menu in BEACON. Then, select Change Reporting Method and follow the prompts);
Email: dluitaxemployerstatus-labor@maryland.gov;
Phone: 410-949-0033;
Mail: Maryland Division of Unemployment Insurance, Contributions Unit-Account Maintenance, 100 South Charles Street, Tower 1, Suite 3100, Baltimore, MD 21201

Reimbursable employers receive a Statement of Reimbursable Benefits Paid correspondence to bill them for benefits charged against their accounts. Employers who receive this form have 15 days from the date of invoice to file a protest (information about filing a written protest is included on the employer’s Statement of Reimbursable Benefits Paid). Interest is charged for any late payments.

Benefit Charges and Taxable Wages

7. How are benefits charged to my employer account?

An employer is generally charged for UI benefits if the employer paid wages to an eligible claimant during the base period. A claimant refers to an individual who submits a claim for UI benefits.

The base period is a one-year period used in determining whether a claimant earned sufficient wages to be eligible for UI benefits. See the Employers’ Quick Reference Guide for more about the base period.

Your benefit charges are based on the proportion of wages you paid to the claimant (in relation to the total wages the claimant was paid by you and any other employees) during the base period.

Example: If a claimant has only one employer in the base period, the employer's account would be charged for 100% of any benefits paid and chargeable. If the claimant had two or more employers during the base period, all employer charges are prorated based proportionately on the wages the employer paid to total wages paid.

This percentage, multiplied by the total amount of benefits the claimant received, equals your benefit charges. You are notified of the amount of the charges at the end of each calendar quarter.

The gross wages paid to a claimant by all employers in the base period are used in determining a UI claimant's weekly benefit amount (WBA). Benefits charged to your account will usually increase your tax rate and will result in higher tax payments.

8. Are there circumstances in which an employer is not charged for UI benefits? Can an employer receive a credit if the claimant must repay the UI benefits?

In some circumstances (listed below), Maryland employers are not charged for UI benefits or receive credits for repayments. However, when an employer is not charged, it does not mean a claimant is ineligible for UI benefits. Except for number 7 below, the non-charging provisions are not applicable to reimbursable employers.

The list below includes reasons for non-charging and credit provisions:

Voluntary quit without good cause attributable to the employment.
Voluntary quit for a better job.
Voluntary quit to attend approved training.
Discharge for reasons which constitute gross misconduct in connection with the work.
Discharge for reasons which constitute aggravated misconduct in connection with the work.
If the claimant is originally granted and paid benefits, but as a result of a redetermination or an appeal is later disqualified, a credit will be given, except to reimbursing employers, for benefits paid prior to the redetermination or the appeal decision. Credits will only be given to reimbursing employers when the claimant repays any benefits improperly paid. Subsequent benefits will only be charged if the claimant resolves the disqualification and the benefits are otherwise payable.
Part-time/full-time employment - If a claimant loses a full-time job, but continues to work a part-time job, partial benefits received by the claimant will not be charged to the part-time employer's account as long as the claimant remains actively employed. An employer who receives a Request for Separation Information correspondence for a claimant who is actively working part-time should clearly indicate the claimant's continued part-time status.

9. Which employee wages are taxable for UI purposes?

Taxable wages include the total remuneration paid up to the taxable wage base limit of $8,500 before any deductions are made.

The following wages are taxable:

Meals and lodging provided by an employer to an employee, unless the meals and lodging are provided on the employer's premises for the employer's convenience.
Tips which are reported pursuant to Section 6053 of the Internal Revenue Code.
Payments to workers for:

dismissal;
vacations;
sick leave (for first six months only); and,
advances to employees for travel or other expenses for which no accounting or reporting to employers is required.

Payments by the employer for the employee's share of Social Security (except for payments made by domestic and agricultural employers).

NOTE: The Federal Unemployment Tax Act (FUTA) taxable wage base remains unchanged at $7,000.

The following wages are not to be reported:

Value of any special discount or markdown allowed to a worker on goods or services purchased from or supplied by the employer where such purchase is optional with the worker.

Payments toward retirement or a death benefit if the employee has no right to receive cash instead, or to assign the employee’s rights therein, or to receive a cash payment in lieu thereof on withdrawal from, or termination of such insurance plan or upon termination of employment.

Facilities or privileges (such as entertainment, cafeterias, restaurants, medical services, or so-called courtesy discounts on purchases) furnished or offered by an employer merely as a convenience to the worker or as a means of promoting health, goodwill, or efficiency among workers.

Discounts on property or security purchases.

Customary and reasonable directors' fees.

Supper money given to a worker to compensate the employee for the additional cost of a meal made necessary by working overtime.

Payments by the employer to or on behalf of an employer for sickness or accident disability after the expiration of six calendar months.
Wages of a sole proprietor, the sole proprietor’s spouse, children of the sole proprietor under 21 years old, and the sole proprietor’s parents.

Wages of partners.

If a partnership consists exclusively of spouses, then their children under 21 years old who are employed by the partnership are not engaged in covered employment.

Wages earned by an individual who is enrolled in a full-time educational program that combines academic instruction with work experience, which is an integral part of the educational program.

Employee pre-tax contributions and salary reductions or deductions under IRS Section 125 cafeteria plans in order to purchase the following benefits: accidental and health insurance, life insurance, or dependent care assistance.

Excess Wages: An employer pays taxes on the first $8,500 of wages paid to an employee in the calendar year. Examples of how to calculate excess wages are listed below:

If an employee earned exactly $8,500 in the first quarter of the calendar year, the employer would have zero excess wages in the first quarter because the entire amount of wages is taxable.

If the same employee earned $7,000 in the second quarter of the same calendar year, the amount of excess wages in the second quarter would be $7,000 because the employer paid taxes on the first $8,500 in the first quarter. For more, see the Excess Wage Calculator.

10. What if an employer has employees working in several states?

Services performed within Maryland or both within and outside of Maryland, are to be reported to the Division if:

The service is localized in Maryland; or,
When there is employment in multiple states and some service is performed in the state where the base of operations is located, then the earnings are to be reported to that state where the individual's base of operations is located.

If no services are performed in the state with the base of operations and some services are performed in the state where direction or control is received, then the earnings are to be reported to the state where the individual's direction or control is received.

If there are no services performed in the state where the base of operations is located or where direction or control is received, then the individual's state of residence is to be used.

The objective is for all services performed by an individual for a single employer to be covered under one state law, wherever the services are performed. Employers may elect to cover an employee through a reciprocal coverage agreement between states.

Under a reciprocal coverage agreement, services that an individual performs in multiple states for a single employing unit are considered to be performed entirely in one state. This can be a state in which:

the employee performs services;
the employee resides; or
the employer maintains a place of business.

Filing Quarterly Contribution Reports and Paying UI Taxes

11. How does an employer file quarterly reports?

Maryland employers are required to report the amount of total gross wages paid and pay unemployment insurance taxes each calendar quarter (for instructions, see the Employer Submit Wage Report tutorial video).

Gross wages include all remuneration for personal services, including commissions and bonuses, and the cash value of all compensation in any medium other than cash.

Employers must also calculate and report the amount of total taxable wages. For Maryland unemployment insurance purposes, taxable wages are defined as the first $8,500 earned by each employee in a calendar year.

You have one month following the end of each quarter to file reports and pay the tax. You must file on time in order to:

Receive maximum credit for your state payments against Federal Unemployment Tax Act (FUTA) payments;

Receive credit for your payroll in experience rating; and,

Avoid interest charges at a rate of 1.5% per month for late payments and a penalty assessment of $35 for each late report.

12. How can an employer pay unemployment insurance taxes?

Maryland employers are required to pay their unemployment insurance taxes by the quarterly due date, four (4) times each year. For employers filing in the BEACON system:

Pay by E-Check (free) at the time of the filing, through BEACON
Pay by paper check and mail to P.O. Box 17291 Baltimore, MD 21297-0365
Pay by ACH Credit after obtaining approval from the Maryland Department of Labor by using the Electronic Funds Transfer Guide.

NOTE: You may view the payments you have made in the BEACON system by selecting “Payments” from your portal’s left menu, and then selecting “Payment History.”

Experience Transfer and SUTA Dumping

13. What happens when an employer transfers its experience rating? What is SUTA dumping?

Frequently, an employer will acquire a business from a previous owner or the employer will reorganize their business. The effect of various transactions on the employer’s contribution rate are summarized below:

New Employing Unit Acquired Business - When a new business entity is formed and it acquires assets, employees, business, organization, or trade from another employer, the new business entity is classified as a successor employer. If there is any common ownership, management or control between the successor employer and the former employer (predecessor), the predecessor’s tax rate and experience rating is transferred to the successor. If there is no common ownership, management or control with the predecessor employer, no experience rating is transferred and the new business entity is assigned the new account rate.

Common Ownership - There is common ownership, management or control when any person serves in any of the following positions for both the predecessor and successor:

Sole proprietor (includes spouse, children and parents of sole proprietor);
Partner of a partnership;
Member of a limited liability company;
Chief Executive Officer;
Chief Financial Officer;
Any corporate officer; or
Any shareholder owning, directly or indirectly, more than 50% of a corporation’s stock.

Taxable Wage Calculation - When calculating taxable wages in the year of the acquisition, a successor employer that assumed the experience rating of a predecessor should make the calculation for each employee based on wages paid to the employee by both the predecessor and successor. Otherwise, the successor may not compute taxable wages based on wages paid by the predecessor.
Existing Employing Unit Acquired Business - When an existing business entity acquires assets, employees, business, organization, or trade from another employer, the existing business entity is classified as a successor employer. The successor continues to pay contributions at the previously assigned rate from the date of transfer through the next December 31. The successor’s tax rate for the year following the acquisition is a blended rate that includes the predecessor’s experience.

Taxable Wage Calculation - When calculating the amount of taxable wages for the quarterly contribution report in the year of the acquisition, a successor employer that assumed the experience rating of a predecessor should make the calculation for each employee based on wages paid to the employee by the predecessor and successor.

A New Employer or an Existing Employer is not a Successor if:

the employer acquires less than 50% of the employees of the predecessor employer;
the predecessor continues to pay wages to the remaining employees after the acquisition of employees in the quarter following the acquisition of employees by the employer; and
other than the transfer of workforce, the employer does not acquire any tangible or intangible assets from the predecessor employer.

Taxable Wage Calculation - When calculating the amount of taxable wages for the quarterly contribution report, a new employer or existing employer which is not classified as a successor employer must compute taxable wages for each employee (based on wages that it paid and not on wages paid by any previous employer).

Reorganized Employer - A reorganized employer is an employing unit that alters its legal status, such as changing from a sole proprietor to a corporation. From the date of the reorganization through the next December 31, the reorganized employer’s UI contribution rate will be the same as the rate of the employing unit prior to the reorganization.

Taxable Wage Calculation - When calculating the taxable wages (for the quarterly contribution report) in the year of the reorganization, a reorganized employer makes the calculation for each employee based on wages paid to the employee before and after the reorganization.

Out-of-State Transfers - Employers transferring all or part of their business from another state to Maryland may be eligible to transfer their experience rate to Maryland. Contact the Experience Rate Unit at 410-767-2413 for additional information regarding out-of-state transfers.

Taxable Wage Calculation - When calculating the amount of taxable wages for the quarterly contribution report in the year of the transfer from another state, an employer should make the calculation for each employee based on wages paid to the employee before and after the transfer.
Penalties - If an employer knowingly withholds or provides false information regarding the transfer of experience rating, the employer may be assigned the highest tax rate in the year of the violation and in each of the next three years. If the employer was already at the highest tax rate for any year, or if the amount of the increase would be less than 2% for that year, then a 2% penalty rate would be assigned.

The employer would be guilty of a misdemeanor and on conviction would be subject to imprisonment not exceeding one (1) year, a fine not exceeding $10,000, or both.
If an individual (who is not the employer), violates, attempts to violate, or knowingly advises an employer in a manner that causes the employer to withhold or provide false information regarding the transfer of experience rating, the individual may be penalized.

Penalties may include:

a civil penalty of not more than $5,000.
conviction of a misdemeanor. On conviction, the person would be subject to imprisonment for up to one (1) year, a fine not exceeding $10,000, or both.

Complete the Business Transfer Report in order to report the transfer of workforce/payroll from one business entity to another business entity.
For additional information regarding employer rates, contact the Experience Rate Unit at 410-767-2413 or toll free at 1-800-492-5524.

NOTE: State Unemployment Tax Act (SUTA) dumping refers to an employer taking unlawful actions to pay at a lower UI tax rate (than should be assigned based on the employer’s experience with layoffs and payrolls). Most frequently, it involves merger, acquisition or restructuring schemes, especially those involving the shifting of workforce/payroll from one business entity to another. To avoid SUTA dumping penalties, submit a Business Transfer Report when workforce/payroll is shifted from one business entity to another and provide any requested information to the Division.

Appeals, BEACON UI System

14. How can an employer file an appeal?

Employers can appeal a determination assignment within 15 days of the decision (appeal instructions will be included on the correspondence you receive).

The employer should include their name; employer UI account number; factual reason for the appeal, etc. The employer should attach any documentation that supports their contention.

For more, see the UI Appeals webpage.

15. Can I get information about my employer account online?

The BEACON system is your secure source for online employer information. You can use BEACON to:

File and pay your taxes online
File quarterly wage reports
View benefit charge statements and annual tax rate information
File appeals
Provide separation information
Manage powers of attorney
Make account updates, and much more.

You will need to create an account in BEACON before logging in. For more, see the BEACON Account Activation and Registration for Employers and Third-Party Agents webpage and BEACON Employer FAQs.

16. How can I ask questions or learn more about UI for employers?

If you have questions, contact the Division’s Employer Call Center at 410-949-0033 or toll free at 1-800-492-5524.

For more information, see: