SUI rate errors: when payroll uses the wrong rate

State unemployment insurance (SUI), also known as SUTA, is a payroll tax every employer pays. Unlike flat payroll taxes, SUI rates are individualized: each employer gets an assigned rate based on their specific claims history. That rate changes annually. And your payroll provider may not update it correctly.

The result: employers systematically overpay or underpay SUI every year, often without knowing it. Overpayment is simply lost money. Underpayment becomes a collection action with penalties and interest attached.

How SUI experience rating works

Most states use one of two methods to assign SUI rates. Reserve ratio states (including Ohio, California, and most of the midwest) calculate a reserve ratio: the employer's account balance divided by average taxable wages over a lookback period. Employers with higher reserve ratios get lower rates. Benefit ratio states (including Florida and Illinois) calculate a benefit ratio: total UI benefits charged against the account divided by total taxable wages. A few states, such as Michigan, add several factors together instead.

Each year, the state mails an annual rate notice, usually between November and January for the upcoming calendar year. This notice shows the new experience rate. Employers have a limited window to protest if the rate is incorrect; each state's page in the state directory shows its window.

Three ways payroll ends up on the wrong rate

1. Last year's rate

The most common error. A payroll system updates rates based on a flat data import from the state. If the import fails, or if the employer's account was not correctly linked, the system defaults to the prior year rate. This can persist for months or an entire year before anyone notices.

2. The wrong state's rate

Employers with workers in multiple states must track a separate SUI rate for each state. A California employee working remotely in Oregon triggers Oregon SUI, not California SUI. Payroll systems with poor multi-state configuration apply the wrong state's rate, or worse, apply the employer's home state rate to all employees regardless of work location.

3. A new-employer rate past its term

New employers get a flat new employer rate for their first years. Once they accumulate enough claims history, they transition to an experience rate. Some payroll systems continue applying the new employer rate past the transition date, which can mean overpaying significantly if the experience rate is lower.

How to check your SUI rate

To check your SUI rate yourself, you need three things:

• Your current year SUI rate notice from the state agency
• Your payroll system's SUI setting for the state
• The state's published rate table, to check the agency's calculation

Compare the rate on your notice to the rate in your payroll system. If they differ, the payroll system needs correction. If the rate on the notice looks wrong relative to your claims history, you have grounds to protest, but you must act within the deadline.

2026 SUI wage bases: the 50 states and DC

The wage base is the annual per-employee amount on which SUI tax is calculated. Once an employee's wages exceed the wage base, SUI stops accumulating for that year. Higher wage bases mean higher SUI liability for employers with well-paid employees.

Washington has the highest wage base at $78,200. Hawaii follows at $64,500. Arkansas, California, Florida, Louisiana, and Tennessee have the lowest at $7,000. Rates vary by state and by employer history; check your state agency's current schedule.

What Kreto does with a rate notice

When you upload a SUI rate notice, Kreto pulls the assigned rate, the tax period and the effective date onto the record. It checks the rate against the agency's 2026 schedule, shows any difference in dollars and drafts the protest for your review, and the protest deadline goes on your calendar. A CPA firm sees this for every client in one workspace.