SUTA Tax
SUTA tax explained: how state unemployment tax is calculated, SUTA vs FUTA, why staffing agencies pay higher rates, and how to keep the rate down.September 25, 2026
5 min read
Payroll
Written by the NextCrew team
Definition
SUTA tax is the State Unemployment Tax Act tax: an employer-paid payroll tax that funds each state's unemployment insurance benefits. It is charged as a percentage of each employee's wages up to a state-set wage base, and the rate depends on the employer's history of former employees claiming benefits.
SUTA is usually a small line on a payroll report and a big line in a staffing agency's burden. Agencies employ many people for short periods, and every assignment that ends is a possible unemployment claim charged to the agency's account. That history sets the rate, the rate sets the burden rate, and the burden rate sets the floor under every bill rate.
How is SUTA tax calculated?
SUTA = the employer's assigned rate × each employee's wages, up to the state's taxable wage base for the year. Once an employee's year-to-date wages pass the wage base, no more SUTA is owed on them that year. Each state sets its own wage base and rate range, and new employers get a starting rate until they build a claims history.
Illustrative example: with an assigned rate of 3.0% and a wage base of $12,000, a Crew Member who earns $20,000 in the year costs $360 in SUTA. One who earns $6,000 costs $180. Short assignments across many people generate more total SUTA per dollar of payroll than long ones, because more of the wages fall under each person's wage base.
Illustrative rate and wage base, not any state's actual figures. Your state notice sets both.
What is the difference between SUTA and FUTA?
| SUTA | FUTA | |
|---|---|---|
| Set by | Each state | The federal government |
| Funds | State unemployment benefits | Federal share of the program and loans to states |
| Rate | Varies by employer history | 6.0% on the first $7,000 of wages per employee, reduced by up to a 5.4% credit for state tax paid |
| Who pays | Employer (employees also pay in a few states, such as Alaska, New Jersey and Pennsylvania) | Employer only |
With the full credit, FUTA is 0.6%. The credit can be reduced in states that have outstanding federal loans.
Why is SUTA higher for staffing agencies?
- Assignments end all the time. Each end can lead to a claim charged to the agency's account.
- Wage bases are hit less often. Short-tenure Crew Members rarely earn past the wage base, so more of their pay is taxed.
- Claims need answering. Every claim the agency does not contest with good records can raise the rate.
Some states have rules specific to temporary help firms: a temporary employee who does not contact the agency for a new assignment when one ends may be treated as having quit voluntarily, if the agency gave them written notice of that requirement. Check your state's rule and get the notice into onboarding.
How do staffing agencies manage SUTA costs?
- 1Respond to every claim
On time, with dates, the reason the assignment ended and any offers of new work.
- 2Offer new work and record it
A documented offer of suitable work matters in many states.
- 3Redeploy quickly
Crew Members moved to the next assignment do not file claims. See redeployment.
- 4Price the real rate
Update the burden in your bill rates when your rate notice changes each year.
- 5Never move payroll to get a lower rate
Shifting employees to a new entity to escape a high rate, known as SUTA dumping, is prohibited under state laws required by the federal SUTA Dumping Prevention Act of 2004.
Bottom line: SUTA is where a staffing agency's turnover turns into a tax rate. Answer every claim with records, redeploy fast, and put the current rate into your burden every year.
How NextCrew helps
NextCrew does not calculate or file SUTA; your payroll provider does. NextCrew keeps the records claims and pricing depend on:
- Termination with a reason. Ending employment records a termination date and reason, and the full job history, timesheets and documents stay in the system.
- A record of offers. Job invitations, confirmations and messages are stored on the Crew Member's profile.
- Rates in one place. Rate configuration sets pay rate, markup and bill rate per position for each client, so a burden change can be priced in.
- Approved hours to payroll. Approved data exports to the payroll system that files the tax.
See staffing payroll software.
Frequently asked questions
Related terms
- Burden rate: employer costs on top of pay, including SUTA and FUTA.
- Bill rate: what the client pays per hour, which has to cover burden.
- Redeployment: moving Crew Members to the next assignment before they file a claim.
- Payrolling: a provider that runs payroll and pays payroll taxes as employer of record.
- Staffing agency insurance: the other large cost that scales with payroll.
General information, not tax advice. SUTA rates, wage bases and temporary-help rules differ by state and change every year.