The Colorado Department of Labor and Employment (DLE) provides temporary compensation to those workers meeting the eligibility requirements of Colorado law. Most Colorado employers are required by law to pay contributions in the form of a tax (SUTA) to the Unemployment Insurance Trust Fund (the Trust). Monies from the Trust are used to pay unemployment benefits to eligible employees. Most Colorado employers that are liable for unemployment taxes are also liable for federal unemployment taxes (FUTA).
An employer’s contribution to the Trust is based on benefit/experience ratings, which relate the employer’s taxes to the cost of providing unemployment benefits to its employees. Employers who have fewer employees receiving unemployment benefits are subject to lower rates. Therefore, it is to the employer’s benefit to contest those claims that are without merit.
An employer doing business in Colorado must register for an unemployment insurance tax account once it employs one or more individuals performing services in Colorado and pays wages. Employers can register online at:
However, not all employers are subject to the taxing provisions of the DLE. Tax liability is determined by the type and nature of the business, the number of workers employed, and the amount of wages paid for services in employment.
There are four ways a private employer can become liable for Colorado unemployment taxes:
Additionally, governmental entities are all covered employers.
General rule: An employer who employs one or more employees in each of 20 weeks and whose payroll in any calendar quarter is $1,500 or more for services performed in Colorado is a covered employer.
Agricultural labor is treated differently. For an employer of agricultural workers to be covered, it must either:
Domestic service is also slightly different from the general rule. An employer of domestic employees only needs to a payroll of $1,000 or more for any quarter during the current or previous calendar year.
When a person or entity acquires the assets of or merges into a company that is a covered employer, the acquirer general assumes the acquiree’s UI account. This may include assumption of the tax rate, indebtedness and future claims of the acquiree, starting with the date of acquisition.
Any employer liable for FUTA taxes is also a liable employer under Colorado law if the employer has one or more employees performing services in Colorado.
Within 30 days of becoming a covered employer, the employer must register for a UI tax account at:
Employers will need to have all of the following information available to register:
An independent contractor is not eligible for unemployment compensation. Generally, if an employer has the right to control the manner and means by which the work is to be performed, the worker will be considered an employee. The Department will presume each worker receiving wages to be an employee until proven otherwise. There are two major concepts used to determine independent contractor status in Colorado:
Some workers and payments are not included when:
The most common exclusions are:
Employers covered under the DLE are required to pay tax on the “taxable wage base.” For 2022, the taxable wage base is $17,000. Taxes paid are deposited in the Trust and monies from the fund are used to pay unemployment benefits to eligible employees. Each year, the DLE mails to all active employers the Notice of Unemployment Insurance Contribution (Tax) Rate, which indicates the tax rate to be used for the coming year. Employers have 30 days to appeal their Notice of Unemployment Insurance Contribution (Tax) Rate if they believe an error occurred in calculating the rate.
Taxes are computed based on their rank within the “benefit ratio.” The benefit ratio refers to the employer’s average annual UI benefits paid for the past five years, divided by their average annual taxable payroll for the same five-year period.
The benefit ratio is a carrot-and-stick system. Employers who have a lot of unemployment benefits charged to their account have a higher ratio and as a result, a higher tax rate. On the other hand, if the employer’s payroll gets bigger (by raising wages or adding jobs), their ratio gets lower and results in a lower tax rate.
Newly covered employers are assigned a contribution rate based on their rank on DLE’s annually adjusted benefit ratio rankings. For 2022, the default rank for non-construction employers is 1.7%. General construction and trades employers are assigned a rate of 1.86% and the rate for heavy construction employers is 7.58%.
A construction contributory employer includes those employers falling within certain classifications detailed in the North American Industry Classification System manual and generally includes employers involved in:
All other newly covered employers are considered non-construction employers. The taxable wage base upon which employers must pay UI taxes is $17,000 for 2022.
Employers must maintain, for five years, accurate payroll records showing the following:
Employers must make these records available to authorized representatives of DLE upon request. Employers also must post the Colorado Employment Security Act (CESA) poster at:
Employers must file quarterly payroll reports at:
Quarterly reports and payments are due April 30 for the first calendar quarter, July 31 for the second quarter, October 31 for the third quarter and January 31 for the fourth quarter.
To be eligible for UI benefits, a claimant must:
Individuals must be able and available for work while claiming benefits. If the claimant is removed from the job market for a reason such as illness, injury, incarceration, full-time schooling, self-employment, lack of childcare, voluntary leaves of absence or traveling, etc., the claimant is ineligible for UI benefits during the period of inability/unavailability.
A claimant is disqualified from receiving benefits if he or she voluntarily quit or was discharged for misconduct (see Disqualification from benefits, below).
Because an employer’s benefit ratio and corresponding tax rate increases whenever a former employee receives benefits, it is to the employer’s advantage to contest those unemployment claims that are without merit. However, most claims for benefits are allowed and the employer has the burden to prove disqualification. Furthermore, protesting a claim for unemployment may drive ex-employees to consult attorneys, who may then raise other legal claims based on the employee’s termination or employment. Moreover, if the employer’s representative makes damaging admissions during the unemployment appeal process, these can be used against the employer in subsequent litigation. Thus, employers should carefully consider whether the benefits of protesting/appealing a claim outweigh the risks and costs of doing so.
For additional information on unemployment laws in Colorado Division of Unemployment Insurance's website at:
About the Author
About the Contributors
About the Firm
Appendix A: Recordkeeping requirements
Background checks — Colorado
Benefits — Colorado
Celebrating in the workplace — Colorado
Child labor — Colorado
Compliance thresholds — Colorado
Disabilities and reasonable accommodation — Colorado
Disaster planning — Colorado
Discipline — Colorado
Discrimination — Colorado
Diversity, equity and inclusion in the workplace — Colorado
Family and medical leave — Colorado
Features of the HR Library
Federal contractors and affirmative action — Colorado
Health insurance continuation coverage — Colorado
Health insurance portability and privacy — Colorado
Health insurance reform — Colorado
Immigration — Colorado
Independent contractors — Colorado
Marijuana — Colorado
Military leave — Colorado
Other types of leave — Colorado
Pandemic Preparedness — Colorado
Performance evaluations — Colorado
Personnel files — Colorado
Plant closings and mass layoffs — Colorado
Policies and procedures manuals — Colorado
Politics in the workplace — Colorado
Privacy rights — Colorado
Public Employers — Colorado
Recruiting and hiring — Colorado
Restrictive covenants and trade secrets — Colorado
Safety and health — Colorado
Snapshot – An HR audit — Colorado
Social media — Colorado
Technology and the Internet — Colorado
Telecommuting — Colorado
Temporary, leased and franchise employees — Colorado
Termination — Colorado
Unemployment insurance — Colorado
Unions — Colorado
Wages and hours — Colorado
Whistleblower protections — Colorado
Workers' compensation — Colorado
Workplace harassment — Colorado
Workplace investigations — Colorado
Workplace violence — Colorado