What is Unemployment Insurance?
Unemployment Insurance is a joint Federal/State insurance system established to protect workers by paying benefits during periods of involuntary unemployment and aid the business community by stabilizing the available work force. The system is funded through payroll taxes on employers.
Who Must Pay?
Generally, any employing unit that has paid wages for employment in Nevada of $225 or more during any calendar quarter must register with the Employment Security Division and pay taxes on those wages.
As defined in NRS 612.060, an "employing unit" means any individual or type of organization, including any partnership, association, trust, estate, joint-stock company, insurance company, corporation, or a receiver or trustee in bankruptcy.
NRS 612.065 states: "Employment" means service, including service in interstate commerce, performed for wages or under any contract of hire, written or oral, express or implied.
Unemployment Insurance Rates
Employing Units in Nevada, who meet registration requirements, must pay unemployment insurance (UI) tax at a rate of 2.95 percent (.0295) of wages paid to each employee up to the taxable wage limit. The employer retains this rate for a period of 14 to 17 calendar quarters (this is dependent on the quarter in which the employer becomes subject to the law), after which the rate will be determined under the "Experience Rating" system. An additional .05 percent (.0005) tax is charged for the Career Enhancement Program (CEP).
Tax Rate Schedule 2024
The administrator, by regulation, establishes a reserve ratio schedule to apply to each of the tax rates for each calendar year. The tax rate schedule for 2024 is as follows:
|When Reserve Ratio is ...
|But Less Than
Taxable Wage Base
Employers are taxed on wages paid to each employee up to the taxable wage base in effect during a calendar year. The tax base is calculated annually and is equal to 66 2/3 percent of the average annual wage for Nevada employees. Although the total wages paid to each employee must be reported to the division each quarter, any wages paid to an individual which exceed the taxable wage base during the calendar year are not taxed.
|Taxable Wage Base
Once an employer becomes eligible for "experience rating," they will receive one of 18 unemployment insurance (UI) tax rates, ranging from .25 percent to 5.40 percent of taxable wages. Each employer's tax rate may vary from year to year, depending on previous experience with unemployment and the rate schedule in effect.
Like most states, Nevada uses the "Reserve Ratio" formula to determine previous experience. The Employment Security Division maintains a permanent "Experience Record" for each employer, consisting of accumulated taxes paid, accumulated benefits charged to their account, and average taxable payroll for the prior 3 years. Each year, the employer's reserve ratio is calculated using their experience record to determine the tax rate under the schedule in effect. Generally, the higher the reserve ratio, the lower the employer's tax rate will be.
Reserve Ratio Formula:
Contributions Paid - Benefits Charged
Average Taxable Payroll, Prior 3 years
$10,000 - $6,000 = .10, or 10.0%
Transfer of Experience Record
If an employer purchases a Nevada business, the experience record of the seller may be transferred to the buyer upon mutual written consent. The purchaser must notify the Employment Security Division within 90 days after the acquisition. A joint application to transfer must be submitted within one year after the date of issuance by the division of the official notice of eligibility to transfer.
Until the transfer of the experience record is completed by the division, the unemployment insurance rate will be 2.95 percent (.0295) of the taxable wages. If this results in an overpayment, the employer account will be credited, or a refund may be requested.
How Do Employers Control Their Costs?
There are a number of things employers can do to help control costs, all of which impact their "reserve ratio" or the unemployment insurance trust fund:
Pay unemployment insurance taxes on time. This is a factor used in "reserve ratio" calculations. (Timely payment also ensures full credit against the employers Federal Unemployment Tax.)
Respond to division notices timely, honestly, and accurately. Whether benefits are paid, and how much, are often determined by employer responses. Without sufficient facts, the division must act on whatever information is available. Benefits paid in error will likely impact the employer's future tax rates.
Employers who feel a determination from the division is in error should file a timely appeal and attend all hearings.
Review benefit charge statements and tax rate notices carefully for errors.
Keep accurate, written personnel records of employee's performance and conduct. Be particularly specific when responding to the division regarding reasons for separations.
Offer job openings to unemployed workers, if possible. This reduces overall cost and possibly the employer's individual tax rate. Take advantage of the free statewide services offered by the Division's Job Connect offices.
Avoid layoffs whenever feasible. Workers could possibly be used temporarily in a part-time position or in some other capacity. Contact other employers in the same industry for possible job openings.
Employers must notify the division if an individual refuses suitable work, or any other instance of system abuse.
Independent Contractor Criteria
Nevada Unemployment Compensation Law does not define "independent contractor." It uses what is commonly referred to as the "ABC" test. This test is unique to the Unemployment Compensation Program. Unless otherwise specifically excluded, payment for personal services is deemed subject to unemployment taxes unless the following conditions are met. All three conditions must be met. A written contract, in itself, does not establish "independent contractor" status. The burden of proof rests upon the employer to demonstrate the existence of these conditions:
- The person has been and will continue to be free from control or direction over the performance of the services, both under his/her contract of service and in fact; and
- The service is either outside the usual course of the business for which the service is performed or that the service is performed outside of all the places of business of the enterprise for which the service is performed; and
- The service is performed in the course of an independently established trade, occupation, profession or business in which the person is customarily engaged, of the same nature as that involved in the contract of service.
If the above conditions cannot be demonstrated, the person is an employee. If in doubt, contact the Contributions Section at (702) 486-0250 for additional assistance.
Alternative Base Period
Nevada Revised Statute 612.025 allows an alternate base period for determining entitlement to unemployment insurance benefits. A standard base period for a benefit claim is defined as the first four of the last five completed calendar quarters. If a claimant is monetarily ineligible under a standard base period, the law allows wages paid in the most recently completed calendar quarter to be considered for determining entitlement. Therefore, the most recently completed four calendar quarters will be used as the "alternate base period."
Nevada employers may be asked to provide wage information for a specific former employee, for the most recently completed quarter (prior to the usual quarterly reporting due dates), if an alternate base period claim is filed.
Even if an employer supplies wage information "early" for an alternate base period, they must report that same information when they file and pay their quarterly unemployment insurance tax report.
If wage information is needed prior to the usual due date for the Employer's Quarterly Contribution and Wage Report, the employer will receive a request to provide the total amount of gross wages and any tips paid during the most recently completed quarter.
The most likely months in which additional requests will be necessary are the months prior to each reporting cycle:
January – Wages for the 4th quarter (prior to January 31 due date).
April – Wages for the 1st quarter (prior to April 30 due date).
July – Wages for 2nd quarter (prior to July 31 due date).
October – Wages for the 3rd quarter (prior to October 31 due date).
Timely cooperation in supplying wage information, if requested, is important. The quarterly wages are necessary to determine a person's entitlement to unemployment insurance benefits and, if claimant is eligible, will allow the benefits to begin without delay.