What Is SUI? A Simple 2025 Tax Guide for State Unemployment Insurance

SUI is an abbreviation for state unemployment insurance, which is a state-level program that provides financial assistance to workers who have lost their jobs. It’s funded by the SUI tax, which is a payroll tax primarily paid by an employer, except in Alaska, New Jersey, and Pennsylvania, where employees also pay their share.

Many people see SUI or SUTA (State Unemployment Tax Act) on their payroll documents and aren’t sure what it means. In this article, you’ll learn exactly what state unemployment insurance is, who pays the SUI tax and how much, and who qualifies for the benefits that this program provides. Also, we’ll explain the differences between state and federal unemployment taxes.

Key Takeaways

• SUI is short for state unemployment insurance, and it’s a program that provides financial assistance to employees who lost their jobs through no fault of their own.
• SUI tax is an employer-only payroll tax in all but three states (Alaska, New Jersey, and Pennsylvania), and the rates and wage bases vary between states and depend on the employer’s experience rating and their industry.
• If you’re an employee in a state where you have to pay the SUI tax, your employer will withhold it from your paycheck, and it will appear on your pay stub, typically listed as “SUI,” “SUTA,” or “UI.”
• Employers who pay SUI tax on time can receive a tax credit for reducing their FUTA tax rate by up to 5.4%.

What Is SUI (State Unemployment Insurance)?

SUI stands for state unemployment insurance, and it’s a program that provides temporary financial assistance to workers who have recently lost their jobs through no fault of their own. SUI programs are created and administered under each state’s unemployment insurance laws. These programs are funded by taxes, which are typically paid by employers, often referred to as SUI taxes.

The funds are used to help individuals who lost their jobs due to layoffs, downsizing, business closures, and similar reasons. It’s important to note that not every employee is eligible for SUI benefits, as they won’t receive them if they resign voluntarily or are fired for misconduct.

Since SUI is governed on a state level, each state administers its own program and may have unique eligibility requirements. Moreover, the amounts and the durations of benefits also vary between states.

Is SUI a Payroll Tax?

Yes, SUI is a type of payroll tax. It’s calculated as a portion of an employee’s wages, but the tax rates and the amounts of wages that are subject to taxation vary depending on the state.

For example, as of 2025, California’s wage base (a portion of wage subject to taxation) is $7,000, while in Washington, the taxable wage base is $72,800. Therefore, to calculate SUI tax, you need to check your local state regulations and wage base.

Who Pays SUI—Employers or Employees?

In the vast majority of states, employers pay SUI taxes. If you’re an employee, you have no responsibilities associated with these taxes, and they won’t be taken from your paycheck. Instead, business owners have to calculate them and pay them with other employer payroll taxes, in addition to paying you your gross salary.

However, there are a few exceptions. In Alaska, New Jersey, and Pennsylvania, employees are required to contribute their share of SUI taxes, not just employers. In these states, a portion of an employee’s gross wage is withheld for the purpose of funding state unemployment insurance.

For example, in Alaska, the taxable wage base as of 2025 is $51,700. The total SUI tax rate is 1.50% out of which the employer pays 1.0% and the employee pays 0.5%. This figure will appear under the payroll deductions on your pay stub, typically marked as “SUI” or “SUTA” tax.

If you work in a state where employees don’t have to contribute to this tax, this item won’t appear on your pay stub.

How to Calculate SUI (State Unemployment Insurance)?

Now that we understand the meaning of SUI and know whose responsibility it is to pay it, let’s learn how to calculate the tax.

The responsibility to calculate the tax typically falls entirely on the employer, even if employees have to pay it. That’s because employers have to withhold the correct amount from an employee’s paycheck and remit it to the state.

#1. Know the State SUI Tax Rate

Before you can begin the calculations, you need to know the exact SUI tax rate. The rates vary between states. Also, they are different between employers in the same state, and even between different industries.

For instance, new businesses are usually assigned a standard “new employer” SUI rate. After a certain period, the employer’s business will have an “experience rating,” which influences how SUI rates are calculated for them. The experience rating is determined by factors such as the history of layoffs and the number of employees who claimed unemployment benefits.

In general, SUI tax rates can go anywhere between 0.01% to over 10%.

#2. Determine the State’s Wage Base

Next, you need to find out the wage base in your state. This represents the maximum amount of an employee’s wage that is subject to SUI tax.

As an example, let’s look at previously-mentioned Alaska, where the taxable wage base in 2025 is $51,700. This means that employers will only pay SUI tax on the first $51,700 that each of their employees earns in a year. Everything they earn above that is not taxed for the purposes of state unemployment insurance.

Wage bases can also be adjusted each year, just like tax rates. States typically change them to accommodate their current funding needs. That’s why you should always check the wage base before processing payroll.

#3. Apply the Formula

You can calculate the SUI tax for each employee by using the information determined in the previous steps and applying the following formula:

Let’s look at the example of a calculation for a business in Texas. We’ll use the average experience tax rate of 0.85%, with a taxable wage base of $9,000. For every employee paid $9,000 or more, the SUI calculation goes as follows:

• 0.0085 * $9,000 = $76.5

The employer would have to pay $76.5 in SUI tax for every employee who earned at least $9,000.

Who Qualifies for Unemployment Benefits?

The exact criteria used to determine who qualifies for unemployment benefits vary between states. However, there are still general requirements that are used in most cases, and they include:

• Involuntary unemployment. The main criterion most states use to determine a candidate’s eligibility is whether they lost their job through no fault of their own. Common reasons for this include layoffs, business closures, and workforce reductions.

• Income and employment history. To receive unemployment benefits, a worker typically had to have worked for a specified period of time (e.g., 12–24 months) and have earned a certain amount of wages during their employment.

• Availability to work. A laid-off employee needs to be able to work and to actively seek new employment to receive the benefits.

States can alter the requirements due to regulatory changes and economic shifts. This makes it all the more important to check the latest information to know whether you’re eligible for the benefits.

The same goes for the actual benefits that unemployed professionals are due to receive. The amount is typically calculated based on the percentage of their earnings during their employment, up to a specified maximum. Additionally, most states offer up to 26 weeks of state unemployment insurance, with Massachusetts providing up to 30.

SUI vs FUTA: Key Differences

When comparing SUI vs. FUTA, the key difference is that SUI is governed on a state level, while FUTA is a federal-level tax.

As a result, the SUI tax rate and wage base vary significantly between states. On the other hand, the FUTA wage base is $7,000, and the tax rate is fixed at 6.0% (before credits) in all states.

In general, employers are required to pay both SUI and FUTA taxes. However, timely SUI payments can grant business owners a tax credit, reducing their FUTA tax rate by up to 5.4%. This means the employer can have a FUTA tax rate as low as 0.6% by regularly fulfilling their obligations to the state.

It’s important to note that some states may have used loans from the federal government to fund their unemployment programs. If these loans are still outstanding, the states are classified as “credit reduction states,” which means their FUTA tax credit is reduced. As such, employers in these states typically pay FUTA taxes at a higher rate, even after reductions.

Here’s a comparison table outlining the main differences between SUI and FUTA taxes:

Does SUI Appear on Employee Pay Stubs?

Whether SUI appears on employee pay stubs depends on the state.

If an employee works in a state where SUI is an employer-only tax, then it won’t be listed on their pay stubs.

However, if an employee works in one of the states where they are required to contribute to the program (Alaska, New Jersey, or Pennsylvania), they will have SUI on their pay stub. It will be listed as a deduction and withheld from the employee’s gross salary. The item will typically be labeled as “SUI,” “SUTA,” or “UI” (Unemployment Insurance).

Understanding these differences is important for both employers and employees. Employers need to know what to include in their pay stubs to ensure compliance and improve recordkeeping, while employees need to know how to read their pay stubs to keep track of their income and deductions, monitor their finances, and prepare for the tax season.

Document and Track SUI Taxes With Paystub.org

At Paystub.org, we designed an intuitive and feature-packed pay stub generator that recognizes which state you selected and automatically includes SUI taxes in the deduction section, when needed. Moreover, the tool has a built-in calculator for rates, hours, gross, and net pay, as well as taxes. This allows you to generate pay stubs with ease, without worrying about miscalculations.

We also offer a complementary Form W-2 generator that will help you create year-end tax forms for your employees just as quickly and effortlessly. In addition to that, we also have a Form 1099 generator and an invoice generator that allow you to document payments to independent contractors and bill your clients, taking full control of your finances.

Final Thoughts

Understanding what SUI is helps both employers and employees understand their tax obligations and financial situation. In the vast majority of states, this is an employer-only tax, which means employees don’t have to worry about it.

In Alaska, New Jersey, and Pennsylvania, employees also pay their share of this tax, though it’s typically the employer’s responsibility to withhold it from their paychecks. That’s why they need to know the exact rates and wage bases in their state.

Plus, if you’re an employer and you pay this tax on time, you can take advantage of the tax credit, lowering your effective FUTA rate by up to 5.4%.

What Is SUI FAQs

#1. Is SUI the same as SUTA?

SUI and SUTA are not exactly the same, but they are very similar and often used interchangeably. The State Unemployment Tax Act (SUTA) is the law that establishes the State Unemployment Insurance (SUI) program, though both terms are used when talking about the state unemployment insurance tax.

#2. What happens if an employer doesn’t pay SUI?

If an employer doesn’t pay SUI, they will face significant penalties along with interest on the unpaid amount. Penalties can increase with longer delays and repeated offenses, and even result in legal consequences.

#3. Do independent contractors pay SUI?

No, independent contractors don’t pay SUI taxes. Since contractors aren’t employees, they aren’t covered by the State Unemployment Insurance program. They are considered self-employed and are only responsible for their own self-employment taxes.

#4. Why do SUI rates go up or down each year?

SUI rates go up or down each year due to a number of reasons. One of the main reasons is the employer’s “experience rating,” which takes into account how many of their employees filed for and received unemployment benefits. A higher number leads to a higher tax rate.

#5. Does SUI affect how much unemployment I get?

The amount of SUI tax the employer pays for you does not affect how much unemployment benefits you get. SUI taxes are used to fund the program as a whole, while the process of calculating the benefits is entirely unrelated.