The Massachusetts Senate passed an Unemployment Insurance reform bill today designed to stabilize UI tax rates for most employers and make those rates more dependent on the hiring and firing record of individual companies.

The measure includes an immediate freeze of UI rates for 2014, averting an automatic 33 percent, $500 million tax increase that took effect on January 1.

Associated Industries of Massachusetts believes the Senate UI bill represents a constructive first step toward reforming the commonwealth’s burdensome system for paying benefits to jobless people. The association had hoped that the Senate would also reduce the maximum duration of benefit weeks from 30 to 26 and increase the time people must work before collecting benefits, but AIM expects to place those issues front and center when the reform moves to the House of Representatives.

“Senate President Therese Murray and Labor and Workforce Development Committee Chair Dan Wolf (right) deserve credit for taking a thoughtful and creative approach to a seemingly intractable problem. We don’t agree with everything in the bill, but it provides a basis for continuing debate,” said Richard C. Lord, President and Chief Executive Officer of AIM.

Under the Senate bill:

• The wage base upon which UI payments are calculated would rise from the current $14,000 per year to $21,000 per year in 2015, a change that by itself would escalate costs for employers.
• An expanded rate table would take effect in 2015, and rates would be set at a new Schedule C for 2015, Schedule A for 2016 and back to Schedule C for 2017. The expanded rate table should offset the effects of the increased wage base for companies with stable employment histories while raising rates for some companies that add and terminate workers frequently. Under the new rates, the most stable employers would pay $153 per employee per year, while the worst-rated companies would pay $2,337 per employee annually.
• Company UI taxes rates will be based upon the average of three years payroll instead of one, minimizing rate shock for expanding companies or those that encounter cyclical economic problems and find themselves having to lay people off.
• The definition of seasonal employment is expanded to 20 weeks of work, closing a loophole under which lawmakers say some people work seasonally and then collect Massachusetts unemployment benefits while living out of state during the winter.

“In effect, it’s revenue neutral in that we’ll collect the same amount in aggregate,” said Wolf, a Cape Cod Democrat.

Murray said in a statement: “The current system serves as a considerable burden to our businesses and it is time for change. This bill will alleviate costs for employers, provide predictability to their budgets and foster an environment where jobs can grow and be created.”

House Speaker Robert DeLeo has indicated that his chamber will consider Unemployment Insurance reform in tandem with an increase to the $8-per-hour state minimum wage. The Senate has already passed legislation increasing the minimum wage to $11 per hour over three years and indexing it to inflation thereafter.

The Unemployment Insurance Trust Fund used to pay jobless benefits in Massachusetts currently enjoys a healthy balance of approximately $800 million.

Massachusetts UI costs, driven by high wages, lenient qualification requirements and an overly generous benefit structure, are among the highest in the country. AIM has long supported reducing the maximum duration of benefit weeks from 30 to 26 when the state’s economy is performing well and increasing the work requirement for eligibility to collect UI benefits from 30 times the weekly benefit amount to 40.