Businesses get a one-month reprieve from huge increase in unemployment fees

As the State House looks to soften the impact, businesses now have until June 1 to pay the first unemployment bills of the year

The State House is looking to soften the impact of a hike in unemployment fees businesses pay.John Tlumacki

Beleaguered businesses across the state just received a one-month reprieve from a massive and unexpected hike in their unemployment costs.

The state Department of Unemployment Assistance notified employers late Thursday that they do not need to make their required first-quarter contributions to the state’s unemployment insurance fund until June 1. They’ll still need to file a report with the department showing how much they paid in wages in the past quarter by the regular April 30 deadline — and some employers have already paid the bill.

The delay is aimed at giving the Baker administration and state lawmakers time to craft a solution to a sudden, unexpected spike in one portion of the unemployment bill, what’s known as the solvency assessment, that employers only learned about, to their chagrin, in the past two weeks. That portion of employers’ bills has risen by about 16 times in 2021, to 9.23 percent of the first $15,000 that each worker earns, from 0.58 percent in 2020. For many companies, this translates to an increase of more than $1,000 per full-time employee.

“We’re going to start bouncing paychecks this week [because] they don’t have the money to cover this stuff, restaurants especially,” said Massachusetts Restaurant Association CEO Bob Luz, who pleaded with the administration on Wednesday for a delay. “We’re that close to being able to start to pull ourselves out of this spiral downward, and all of a sudden, we’re faced with this.”

Terry MacCormack, a spokesman for Governor Charlie Baker, said: “We’re still evaluating this issue and we will have more to share soon.”

Business leaders and state lawmakers had thought they would see only a modest increase at most, after the Legislature last month froze the state’s schedule of unemployment insurance rates for employers. But the Legislature did not freeze the solvency surcharge, which is used to fund benefits not covered by the main unemployment insurance charges that are typically tied to a company’s recent layoff history. The end result: an increase that could dwarf any savings from the much ballyhooed freeze of the rate schedule.

Federal law essentially requires the solvency assessment to pay for the costs of state unemployment benefits resulting from COVID-19-related layoffs, essentially “socializing” the cost of pandemic layoffs so employers that didn’t cut jobs last year help those that were forced to do so.

Jon Hurst, president of the Retailers Association of Massachusetts, said the temporary relief will be appreciated by the business community. But he said employers shouldn’t end up covering the entire costs of the state’s unemployment debt, expected to exceed $4 billion, when many layoffs occurred because of government-imposed restrictions and shutdowns.

Hurst is among the business lobbyists who want to see state officials offset at least some of these costs by using some of the $4.5 billion scheduled to come to Massachusetts from the recently passed $1.9 trillion federal stimulus bill. Another suggestion being floated: spreading out the cost of this hike over several years.

Eileen McAnneny, president of the business-backed Massachusetts Taxpayers Foundation, said there may be some strings attached to the federal money, so it might make sense to wait until the US Treasury issues guidelines about how it can be spent, something expected in May. Still, she said, drawing from the federal influx is “something that should be considered, given the magnitude of the assessment increase.”