Pennsylvania employers pay State Unemployment Insurance (SUI) — called Unemployment Compensation (UC) contributions — on the first $10,000 of each employee’s wages per year. New employers pay 3.822%. Experienced employers pay between 1.419% and 10.3189% based on their claims history. At the new employer rate, the maximum annual UC cost is $382.20 per employee.
Table of Contents
State Unemployment Insurance — called Unemployment Compensation (UC) in Pennsylvania — is a direct employer cost. Unlike state income tax, which you withhold from employee paychecks, UC contributions come entirely out of your business. Understanding how the rates work, how they are calculated, and what drives them up or down can have a real impact on your payroll budget.
1. SUI at a Glance
| Detail | 2026 Value |
|---|---|
| New employer rate | 3.822% |
| Experienced employer minimum rate | 1.419% |
| Experienced employer maximum rate | 10.3189% |
| Taxable wage base | $10,000 per employee per year |
| Max cost at new employer rate | $382.20 per employee |
| Max cost at top rate (10.3189%) | $1,031.89 per employee |
| Min cost at lowest rate (1.419%) | $141.90 per employee |
| Paid by | Employer only (not withheld from employees) |
| Filing frequency | Quarterly (Form UC-2) |
| Payment portal | uc.pa.gov (UCMS) |
2. New Employer Rate: 3.822%
When you hire your first Pennsylvania employee and register with the PA UC system, you are assigned a new employer rate of 3.822%. This rate applies to all new employers that have not yet established an experience history with the UC system, regardless of industry or business size.
Why New Employers Have a Single Rate
Pennsylvania’s experience rating system requires actual payroll and claims data to calculate an individualized rate. New employers simply do not have that history yet. The 3.822% new employer rate represents the Department of Labor & Industry’s estimate of an average employer’s claims liability before their own history is established.
How Long the New Employer Rate Applies
The new employer rate applies until you have been a registered Pennsylvania employer for at least one complete calendar year with a full quarter of payroll data on file. At that point, the PA Department of Labor & Industry will calculate your first individualized experience rate. For most employers, this means the new employer rate applies for roughly the first 12–18 months of operation.
3. Experienced Employer Rates: 1.419%–10.3189%
Once you have established an experience history, your UC contribution rate is recalculated each year. The resulting rate can be anywhere from 1.419% (the minimum) to 10.3189% (the maximum). The actual rate depends on the ratio between the contributions you have paid in and the UC benefits that have been paid out to your former employees.
Rate Schedule Components
Pennsylvania’s rate structure involves several components that add up to your total contribution rate:
- Base contribution rate: Your individualized rate based on your reserve account balance and payroll history.
- Surcharges: Additional percentages that may be assessed when the UC trust fund balance falls below certain statutory thresholds. These surcharges are applied across all employers when the fund needs rebuilding.
- Charges or credits: Adjustments based on the overall experience of the employer class you fall into.
Your total assessed rate combines these components. The Department of Labor & Industry notifies each employer of their assigned rate for the upcoming calendar year at the end of the prior year.
4. The $10,000 Wage Base
Pennsylvania’s UC taxable wage base is $10,000 per employee per calendar year. This means:
- Once an employee has been paid $10,000 or more in a calendar year, no further UC contributions are owed on that employee for the rest of the year.
- For employees earning less than $10,000 for the year (part-time, seasonal, short-tenure employees), the entire annual wage is subject to UC contributions.
- The wage base resets to zero on January 1 of each new calendar year for every employee.
5. Total Annual Cost Per Employee
Here is how to calculate your actual UC cost per employee based on your assigned rate:
| Assigned Rate | Annual Cost (at $10,000 wage base) | Monthly Equivalent |
|---|---|---|
| 1.419% (minimum) | $141.90 | $11.83 |
| 3.822% (new employer) | $382.20 | $31.85 |
| 6.0% (mid-range) | $600.00 | $50.00 |
| 10.3189% (maximum) | $1,031.89 | $85.99 |
The difference between the minimum and maximum rate represents nearly $890 per employee per year. For an employer with 10 employees, the gap between the best and worst rates is almost $9,000 annually — a meaningful amount that is directly within your control through careful employment and claims management practices.
6. How Experience Rating Works
Pennsylvania uses a reserve-ratio experience rating system to calculate individualized UC contribution rates. Your experience rate is based on the ratio between your employer reserve account balance and your average annual taxable payroll.
Your Reserve Account
Every registered PA employer has a UC reserve account maintained by the Department of Labor & Industry. Think of it as a running ledger:
- Credits (contributions paid in): Each quarter, the UC contributions you pay are credited to your reserve account.
- Debits (benefits charged): When a former employee collects UC benefits, the cost is charged against your reserve account.
- Balance: Your reserve account balance is the cumulative total of all contributions paid minus all benefits charged over your entire history as a PA employer.
The Reserve Ratio Calculation
Your experience rate is determined by dividing your reserve account balance by your average annual taxable payroll (calculated over a 3-year period). This ratio is called your reserve ratio. A higher positive reserve ratio means you have paid in more than has been paid out, resulting in a lower contribution rate. A negative reserve ratio (more paid out than paid in) results in higher rates.
Rate Table Lookup
Once your reserve ratio is calculated, the PA Department of Labor & Industry uses a published rate table to determine your specific contribution rate. The rate table assigns contribution rates to ranges of reserve ratios. Employers with the highest positive ratios receive the minimum rate; those with negative ratios at the bottom of the scale receive the maximum rate.
7. The PA UC Trust Fund
The Pennsylvania UC Trust Fund is the pool of money from which UC benefits are paid to unemployed workers. The health of this fund — its balance relative to total covered wages in the state — affects contribution rates for all Pennsylvania employers.
Trust Fund Surcharges
When the trust fund balance falls below certain statutory thresholds, Pennsylvania law requires additional surcharges to be added to all employer contribution rates. These surcharges are applied across the board — they are not based on your individual experience rating. During periods of high unemployment (such as the COVID-19 pandemic of 2020–2021), trust fund surcharges can significantly increase effective rates for all employers.
Conversely, when the trust fund is healthy and well-funded, surcharges are reduced or eliminated, which can lower effective rates across the state. Monitoring the trust fund’s health gives you insight into whether surcharges are likely in coming years.
8. How Unemployment Claims Affect Your Rate
Every time a former employee successfully collects UC benefits, the cost of those benefits is charged against your reserve account. Over time, these charges lower your reserve ratio and push your contribution rate upward. This is why effective claims management is a legitimate cost-control strategy.
Not All Claims Are Chargeable
Not every UC benefit payment will be charged to your account. Benefits paid to a former employee may be non-chargeable in certain circumstances:
- Separation for cause: If an employee was discharged for willful misconduct and you properly documented and reported the reason, the benefits may not be charged to your account.
- Voluntary quit without good cause: If the employee resigned without a compelling reason and you contest the claim successfully, benefits paid are generally not charged to your account.
- Temporary layoffs due to lack of work: In many cases, benefits paid during a seasonal or temporary layoff are charged at a reduced rate compared to permanent separations.
Importance of Responding to Claims
When a former employee files a UC claim, the PA Department of Labor & Industry sends you a notice requesting information about the separation. Responding promptly and accurately to these notices is critical. If you do not respond, benefits will be awarded by default, and the charges will flow to your reserve account — even if the claim would have been disqualified with proper documentation.
9. Strategies to Keep Your UC Rate Low
- Hire carefully. High turnover means more separations, more potential claims, and more charges to your reserve account. Thorough hiring processes that find well-matched candidates reduce turnover and its UC cost consequences.
- Document performance and conduct issues. Clear, consistent documentation protects your right to contest claims that should be disqualified. Build a culture of documentation from day one.
- Respond promptly to UC claim notices. Never ignore a UC claims notice from the Department of Labor & Industry. Missing the response deadline almost always results in automatic benefit awards and charges to your account.
- Contest invalid claims. If a former employee files a claim that you believe should be disqualified (voluntary quit, misconduct termination), contest it formally. The process exists for exactly this purpose and you should use it when warranted.
- Consider voluntary contributions. If your reserve ratio is close to a lower rate bracket, a voluntary contribution can tip the balance and lower your rate for the following year.
- Track your reserve account balance. Log into UCMS regularly to monitor your reserve account balance, view your experience rating, and check for any claims activity on your account.
10. Frequently Asked Questions
Do employees pay into Pennsylvania UC?
No. Pennsylvania UC contributions are an employer-only expense. Unlike states such as New Jersey and California that have employee-paid SDI or similar taxes, Pennsylvania does not require employee withholding for UC. The entire cost comes from your payroll budget.
Is the PA UC wage base going to change in future years?
The PA UC wage base has been $10,000 for many years. Changes to the wage base require legislative action. Monitor the PA Department of Labor & Industry’s announcements for any proposed changes. As of 2026, the wage base remains $10,000.
What if I disagree with my experience rate?
You have the right to request a review of your rate calculation. Contact the PA Bureau of Unemployment Compensation Contributions to request an audit of your reserve account. Common errors include benefit charges that should have been disputed, incorrect payroll totals, and misapplied surcharges.
How does the PA UC rate compare to other states?
Pennsylvania’s new employer rate of 3.822% is higher than many states (for example, Texas’s new employer rate is 2.7% and North Carolina’s is 1.0%), but lower than some high-cost states. The $10,000 wage base, while not the highest nationally, means the total annual cost per employee is moderate compared to states with higher wage bases.
Can I be penalized for not responding to a UC claim?
Not directly penalized, but failing to respond means you lose the opportunity to contest the claim. Benefits will be awarded and charged to your account by default. Over time, those charges lower your reserve ratio and increase your contribution rate — which is an indirect financial penalty for non-responsiveness.
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Disclaimer
This article is for informational purposes only. SUI rates and trust fund surcharges change annually. Verify current rates with the PA Department of Labor & Industry at uc.pa.gov.
Last reviewed: February 2026.