Do you have to pay UC taxes for your employees? Of course. But the definition of “employee” under the UC tax law is much broader than you might think and, therefore, so is a business’s potential tax liability.
Covered Employment Under the PA UC Law
All employers doing business in Pennsylvania must understand that under the PA UC Law, the term “employee” is presumed to apply to every individual who performs services for which he or she is paid. Unless specifically excluded from coverage, all work for which payment is made under any contact of hire, express or implied, written or oral, including work performed in interstate commerce or as an officer of a corporation, is covered by the Law.
Certain types of employment and payments are specifically excluded from coverage under the UC Law. More information is available here.
Uniform Definition of Employment
The objective of the uniform definition of employment is to cover under one state law all the service performed for one employer by an individual, wherever it is performed. The following guidelines for applying the statutory provisions are recommended.
First, it is necessary to determine whether the state service is localized in any state. Only if the service is not localized in any state is any other test necessary. If the service is not localized, it is necessary to determine in what state the individual’s base for operations is located, and whether the individual performs any service in that state.
If the individual has no base for operations or if no service is performed in the state in which the base for operations is located, then it is necessary to look to the state from which the individual’s service is directed or controlled. It is only when coverage is not determined by any of these tests that residence becomes a factor.
It may be necessary to apply four tests to determine the state of coverage.
- Localization of Service
- Base of Operations
- Place of Direction and Control
Please refer to the Localized and Non-Localized Employment Pamphlet UCP-7 (PDF) or contact the UC Employer Contact Center at 1-866-403-6163 for more information.
All employers providing covered employment whether full and/or part-time must register with the Office of Unemployment Compensation Tax Services (UCTS). Enterprises may register electronically by accessing PA Biz Online.
Voluntarily Elected Coverage
Any employer not subject to the Pennsylvania UC Law has the option of voluntarily requesting coverage, although UCTS must approve the request before coverage is extended. Upon approval, the elected coverage is binding on the employer for not less than two years. To request coverage, an employer must file an application with UCTS.
The “Catch-All Clauses” Under FUTA
Section 4(x)(6) and Section 4(l)(6) of the Pennsylvania UC Law have been termed the “catch-all clauses.” These provisions state that regardless of the exceptions contained within the Pennsylvania UC Law, services and remuneration for services performed which are considered covered employment under the Federal Unemployment Tax Act (FUTA) will also be considered covered employment under the Pennsylvania UC Law.