Guide: Start a Business | Bonus Step

Understand Employer Responsibilities

Unemployment Insurance

If you will be hiring employees in Iowa, you will more than likely need to pay into Unemployment Insurance (UI) to the Iowa Workforce Development. So, what is UI and why is it important?

The Iowa Employment Security Law, governing legislation for the state’s UI Program, benefits both the state and its citizens. It provides benefit payments to qualified individuals who are temporarily unemployed to help them meet expenses that cannot be delayed. Maintaining the purchasing power of jobless individuals also has a stabilizing influence on the state’s economy. 

The law restricts payment of UI benefits to only those who are unemployed or working reduced hours through no fault of their own.  They must be able to work, available for work, and actively searching for work. 

Employers do not make any deductions from the employee’s paycheck to fund UI benefits. Benefits are paid from a fund exclusively supported by a payroll tax levied on Iowa employers. The tax varies for employers and is primarily dependent on two factors:

  • How the employer’s employment history compares to that of all other employers who are participating in the UI program
  • Overall fiscal condition of the UI Trust Fund

The Iowa law stipulates that UI taxes may be collected from employers under eight different tax rate tables, and each tax rate table has 21 rate brackets (or ranks). Rates vary from 0.000% to 9.000% on table 1, and from 0.000% to 7.000% on table 8. This means table 1 collects the most UI tax and table 8 collects the least UI tax. 

The tables were established to help maintain the stability of the UI Trust Fund. As such, a formula in the law mandates movement to a table that collects more revenue when the balance in the UI fund is low and movement to a table collecting less revenue when the balance is high. 

The table effective for any given year is applicable to all participating employers. The table in effect for all private employers for 2020 is Table 7. Rate tables are updated annually. During November, a Notice of Tax Rate is mailed to each employer indicating the tax rate to be used for the coming year.

An account for each employer covered by the Iowa Employment Security law is maintained by the Unemployment Insurance (UI) Division. Each employer is assigned an employer account number at the time the employer’s liability status is established. This number should appear on all correspondence and forms submitted by the employer to Iowa Workforce Development (IWD). New myIowaUI accounts are created online.

Classifying Workers

Unsure if who you are hiring would be considered an employee or independent contractor? When determining whether the person providing service is an employee or an independent contractor, all information that provides evidence of the degree of control and independence must be considered. 

  • The right to control the work to be done and how it will be done is one of the main factors considered.
  • The right to discharge a worker at will and without cause is also strong evidence of the right of direction and control.

Intentional misclassification of workers is illegal, so make sure you spend the time to understand how to best classify your employees. 

Reporting New & Rehired Workers

Federal and State law require employers to report newly hired and rehired employees to a central registry. The Centralized Employee Registry (CER) is a computer database keeping track of newly hired and rehired employees and contractors in Iowa. The information provided to the CER helps streamline the process of withholding child support payments from the income of employees and contractors who need to provide payments. For additional information and instructions on how to report new hire information in Iowa, please visit the CER website.

Additional Resources

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