Experience Rating

Experience rating is how a state sets an employer's unemployment tax rate from its own history. Employers whose former workers draw more unemployment benefits pay a higher rate, and employers with few claims pay less.

New employers have no history, so the state assigns a starting rate, often for the first one to three years. After that the rate is recalculated each year and mailed to the employer as a rate notice. States compare benefits charged to the account against taxes paid in and wages, with methods that differ by state.

It only affects SUTA. FUTA is the same for every employer in a state. To see where a state's rates start and end, open its page in the payroll calculator by state.