Northam order spares Virginia businesses from higher unemployment insurance taxes

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An executive order temporarily changing the way Virginia’s unemployment insurance tax is collected will provide tax relief for businesses by not holding them accountable for layoffs during the COVID-19 pandemic.

The Unemployment Insurance Employer Tax Rates for 2021 are assigned based on a business’s actions from the previous fiscal year: July 1, 2019, to June 30, 2020. Although layoffs normally would cause a business to pay more in unemployment taxes, Executive Order 74 orders the Virginia Employment Commission to not penalize any business for layoffs that occurred from April through June.

“The Virginia Employment Commission remains focused on providing relief for Virginia businesses and workers during these unprecedented times,” VEC Commissioner Ellen Marie Hess said in a statement. “These actions will ease the burdens on families and businesses and help our economy grow.”

Without the change, businesses would have been liable for about $200 million to replenish the fund. A budget amendment to backfill the fund with $210 million passed the General Assembly during its most-recent special session and was signed by Gov. Ralph Northam.

According to the governor’s office, about 1.4 million people have filed for unemployment benefits this year, which is more than 10 times higher than the previous year. This unexpected increase left the Unemployment Insurance Trust depleted and caused the state to borrow money from the federal government. To keep up with the higher demand, a budget amendment allocated $15 million for technology upgrades and customer service support for the system.

“Since the start of this pandemic, the Commonwealth has distributed more than $9.7 billion in benefits to hundreds of thousands of Virginians, helping them get through these hard times,” Northam said in a statement. “I am proud of what the Virginia Employment Commission has been able to accomplish, but there is still unprecedented need. In the face of federal inaction, these changes will put more of our unemployment insurance funding into the hands of unemployed workers and small business owners who desperately need it.”

Nicole Riley, the Virginia state director for the National Federation of Independent Business, said Northam’s order will provide relief for small businesses. The NFIB is the largest small business association in the country.

“This is a big relief for Virginia’s small businesses,” Riley said. “Our members understand the importance of following the rules and protocols necessary for stopping the spread of the deadly coronavirus, but these restrictions come at a tremendous cost. Workers were let go, and some businesses that planned to close temporarily have closed for good. Governor Northam’s decision to waive the charges for employers who laid off or furloughed workers will relieve some of the financial pressure on Virginia’s small businesses and make it easier for them to get back on their feet and put people back to work.”

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