Employer incentives proposition for 2016


Employees want more money, but when an employee is hired at any amount, their wage is being paid at nearly double that amount by their employer. Most employees do not understand that the State and Federal government are paid two types of insurance for each employee. Part-time workers may not cost less than double their wage (in many events may cost much more than twice their wage).
Now that the ACA is adding costs to employers, there is need for some costs to be lowered in employing people if we want to be able to have employers add more workers or even be able to afford the employees they currently employ.

What incentives can we offer to employers without employees losing the benefits of health insurance, unemployment insurance, or workers compensation? The current structure is clearly unsustainable.

Let us begin by asking who gets the money paid for these “insurances”.

The State and the Fed receive every dollar employers pay toward worker’s compensation and unemployment. However, when a company does not utilize these worker safety nets, there is no incentive for the employer, the cost remains the same, and although they prove to have a safe environment with a quality employment system, there is no benefit to the employer’s costs.

Since the State controls the costs, the funds, and the payout of the benefits, it benefits the State to have less use for unemployment and less injuries which would need worker’s compensation. Both the employers of Maine and the State of Maine would benefit from a better system of insurance cost management.

As a legislator, it is my plan to create, and work towards passing, an incentives program for employers who do not use unemployment and do not use worker’s compensation. Just like your car insurance, it is beneficial to be offered a lower cost for proving an ability to keep employees safe and employed. Employers who prove year after year to have zero injuries on the job and low turnover rates should be offered an incentive. Tiering the costs of these insurances to benefit low injuries and low unemployment benefits the workers, the employer and the State in costs, lives, consistency, and in the future of our employment fields.

I look forward to hearing from more business owners as we move into 2016.

The time is now for a better representation in Augusta. Everyone from workers to employers to the State budget and employment climate can benefit when legislators are concerned with every Mainer.


Richard Light

District 96 House candidate 2016




Cross reference information:

The basic unemployment insurance program is run by the states, although the U.S. Department of Labor oversees the system.  The basic program in most states provides up to 26 weeks of benefits to unemployed workers, replacing about half of their previous wages, on average.  States provide most of the funding and pay for the actual benefits provided to workers; the federal government pays only the administrative costs.  Although states are subject to a few federal requirements, they are generally able to set their own eligibility criteria and benefit levels.

How Is Unemployment Insurance Funded?

UI Taxes

The basic UI system is funded by taxes that employers pay on behalf of their employees.[22]  While technically employers pay both the federal and state taxes, economists generally regard the tax as falling on workers on the theory that the dollars employers pay in tax would otherwise go into workers’ paychecks.

States levy taxes on employers to finance regular UI benefits for unemployed workers (the federal government typically picks up the full tab for temporary emergency UI benefit programs such as EUC).  The federal government also levies a UI tax on employers, under the Federal Unemployment Tax Act (FUTA), to finance the administration of state UI programs.  This tax also supports the account that has been used to pay for extended weeks of benefits during most recessions[23] and the fund from which states can borrow when necessary to pay regular state UI benefits.[24] 

The federal tax is equal to 0.6 percent of the first $7,000 paid annually to each employee.[25]  This tax is regressive; because most workers earn more than $7,000 per year, they are effectively paying the same flat tax of $42 per year regardless of income.  FUTA taxes thus represent a much smaller share of the wages of high-wage workers than low-wage workers.

If, in better economic times, federal trust fund balances grow large enough, the law stipulates that additional transfers be made automatically to the states.[26]  These “Reed Act” transfers (named after the 1954 legislation establishing this policy) go directly into state unemployment trust funds.  States can use this money only for unemployment insurance but are not required to use it to improve or expand their UI benefits.

The state UI tax is levied not on a firm’s entire payroll but rather on an initial dollar amount, called the taxable wage base, of each employee’s earnings.  The minimum taxable wage base that a state can use is $7,000 per employee.  This minimum taxable base is by law the same as the taxable wage base for the federal UI tax and has not been increased since 1983.[27]  The median state taxable wage base in 2012 was $12,000.[28]

An employer’s tax paid per employee is determined by the taxable wage base and the tax rate.  Each employer’s tax rate is determined by its “experience rating,” which in turn is based on the employer’s history of laying off workers who then receive UI benefits.  Businesses with higher layoff rates face a higher UI tax rate and thereby contribute more to the program that supports these workers than businesses with lower layoff rates.  On average, employers contributed $489 per worker to state UI programs in 2012 (less than 1.0 percent of total wages paid),[29] but that amount varies greatly across states and among employers within states.  Due to the caps on taxable earnings, the state unemployment insurance tax is, like the federal tax, regressive. 




[22] State UI taxes are explicitly deducted from employees’ pay in Alaska, New Jersey, and Pennsylvania.

[23] These are funded out of general Treasury funds, as EUC was.

[24] In the Great Recession, however, states’ borrowing for their UI programs has far exceeded the available federal UI trust fund reserves, and the federal trust fund is borrowing, in turn, from the U.S. Treasury to make the loans to the states.

[25] Technically, the gross FUTA tax rate is 6.0 percent, but states with UI programs approved by the Department of Labor and no delinquent loans from the federal trust fund receive a 5.4 percent credit, making the effective tax rate 0.6 percent.  An additional 0.2 percent FUTA surtax was established in 1982 — raising the per-employee federal UI tax rate to 6.2 percent ($56 on the first $7,000 paid) — but Congress allowed it to lapse in July 2011.

[26] Reed Act distributions have been made in only eight years:  from 1956 through 1958 and from 1998 through 2002.

[27] Technically, states may set their taxable wage bases below the $7,000 federal taxable wage base, but the law requires the federal government to sharply increase federal UI taxes on employers in states that fail to meet this minimum.  As a result, no state sets its taxable wage base below $7,000.

[28] The lowest state taxable wage base in 2012 was $7,000 (in Arizona, California, and Puerto Rico); the highest was $41,300 in Washington.  Washington is one of 18 states where the taxable wage base is automatically adjusted to keep up with wage growth (typically on an annual basis).

[29] Calculations based on data from Department of Labor Employment and Training Administration, “Financial Data Handbook 394 Report,” http://www.ows.doleta.gov/unemploy/hb394.asp.


§401. Liability of employer

1. Private employers.  Every private employer, including an independent contractor who hires and pays employees, is subject to this Act and shall secure the payment of compensation in conformity with this section and sections 402 to 407 with respect to all employees, subject to the provisions of this section. Unless employed by a private employer, a person engaged in harvesting forest products is subject to this Act and shall secure the payment of compensation in conformity with this section and sections 402 to 407 with respect to that person individually if that person is an employee as defined in section 102, subsection 11, paragraph B-1.

A private employer who has not secured the payment of compensation under this section and sections 402 to 407 is not entitled, in a civil action brought by an employee or the employee's representative for personal injuries or death arising out of and in the course of employment, to the defense set forth in section 103. The employee of any such employer may, instead of bringing a civil action, claim compensation from the employer under this Act.




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