Most employees in Kentucky are covered by unemployment insurance. Covered employees include corporate officers but not owners and partners in unincorporated businesses.

The taxable wage base for U.I. taxes in Kentucky is the first $8,000 of each worker's annual wages, including tips. An individual working forty (40) hours per week at the federal and state minimum wage exceeds the taxable wage within a calendar year.

U.I. tax rates for Kentucky's employers are set annually from statutory tables of rates. The balance in the state U.I. trust fund determines the rate table in effect during a calendar year. An individual employer's contribution rate within the table is determined by its reserve account balance ratio.

Reserve Account Balance Ratio Rate Equals (=)

The statutory table in effect in 2005 has a minimum contribution rate of 0.5 percent of taxable wages for employers with the best reserve account balance ratio, and a maximum rate of nine and one-quarter (9.25%) percent for employers with the poorest reserve ratios. The average employer tax rate was 2.3% in 2003.

A new employer, except contract construction, pays at a rate of at least 2.7 percent of taxable wages during the first three (3) years of operation to establish a reserve account with the state U.I. system; the rate will increase if benefits charged to the account during this time exceed contributions paid. Thereafter it is experience rated, with a contribution rate based on its reserve ratio.

Benefit payments are made from the state U.I. fund to qualified unemployed workers and are charged against the account of the last firm the claimant worked for in each of ten (10) weeks, whether or not consecutive, preceding his/her layoff.