Vermont Unemployment Insurance for New Employers: $15,400 Wage Base for 2026 and the 1% Starting Rate
Vermont Unemployment Insurance for New Employers: $15,400 Wage Base for 2026 and the 1% Starting Rate
Once you hire employees in Vermont, you will often become a Vermont unemployment insurance employer, depending on the tests below. If you do, you owe state UI tax on part of every worker's pay, and you report and pay it every quarter. For 2026, the taxable wage base is $15,400 per employee, and most new employers start at a 1% rate. This guide covers who has to register, how the wage base and starting rate work, the quarterly deadlines, and what late payment costs.
This guide is informational content, not legal or tax advice. Rates, wage bases and filing rules change, and your facts may differ. Confirm current figures with the Vermont Department of Labor, and consult a qualified CPA or attorney before making registration, payroll or entity decisions.
Who has to register as an employer
Vermont does not ask only whether you have an employee. Under 21 V.S.A. 1301(5), you are an employer for UI purposes if any of the following applies:
- You paid wages of $1,500 or more in any calendar quarter of the current or prior year.
- You had at least one employee in each of 20 different weeks in the current or prior year.
- You are a domestic service employer and paid $1,000 or more in wages in a quarter.
- You are an agricultural employer and paid $20,000 or more in wages in a quarter, or employed 10 or more workers for 20 weeks.
- You are a 501(c)(3) nonprofit that employed four or more people for 20 weeks, which follows the federal rule.
- You are a successor employer that took over a business or its workforce from an existing employer.
Because the first two tests run on quarterly wages and weeks worked, a small business can cross the line partway through the year without noticing. A part-time helper who works one shift a week from early February through late June has worked in about 20 different weeks by then, which makes you an employer even if quarterly pay stayed under $1,500. Check your payroll after every quarter instead of waiting for year end. If you are in agriculture or domestic service, or you are unsure whether a worker counts, ask a qualified professional before you assume you are exempt.
The 2026 taxable wage base is $15,400
Vermont applies the UI tax rate only to the first $15,400 that each employee earns in calendar 2026. Wages above that amount are not taxed for UI purposes. The base has increased every year in the recent past:
| Calendar year | Vermont taxable wage base |
|---|---|
| 2023 | $13,500 |
| 2024 | $14,300 |
| 2025 | $14,800 |
| 2026 | $15,400 |
The cap applies to each employee separately. A business with ten staff does not get one shared $15,400 limit. Each person has an individual cap, so your payroll system or bookkeeper needs year-to-date wages for every worker to know when each one passes the base.
Do not mix this up with federal unemployment tax (FUTA), which applies only to the first $7,000 each employee earns. Paying your state UI tax on time reduces your federal FUTA rate from 6.0% to 0.6%, so the state filing affects your federal bill as well.
A worked example
Say you hire a bookkeeper at $30,000 a year starting in 2026. Vermont UI tax applies to her first $15,400 of wages. At a 1% rate, that is $154 of state UI tax for the year. For federal purposes, FUTA applies to her first $7,000, and at the reduced 0.6% rate that comes to $42. Those two figures give you a planning baseline for one employee. Your actual cost depends on your assigned rate, the date each person was hired, and the wages each one earns. Confirm with the Department of Labor which rate applies to wages paid before July 1, 2026, because the 1% new employer rate takes effect on that date for most employers.
The 1% new employer rate
Most new employers are assigned a 1% starting rate, effective for most employers beginning July 1, 2026. This is a starting rate, not a permanent one. It applies while your account does not yet have the history needed for an experience-based rate. You do not choose the rate. The Department of Labor assigns it, so read the notice it sends you and contact the Department promptly if anything looks wrong.
Out-of-state construction corporations pay an industry-average rate
Out-of-state (foreign) construction corporations in three construction codes do not get the 1% starting rate. They are assigned an industry-average rate instead:
| NAICS code | Industry | Rate |
|---|---|---|
| 236 | Construction of buildings | 1.9% |
| 237 | Heavy and civil engineering construction | 4.0% |
| 238 | Specialty trade contractors | 2.7% |
If your business is a foreign corporation in one of these codes, the industry-average rate applies. Confirm your NAICS classification and entity status with the Department before you file your first report, because the code you use determines your rate.
How your rate changes over time
Vermont uses experience rating. To move off the new employer rate, your account must have at least one complete calendar year of benefit liability. That is why most employers stay at the new employer rate for at least two years. After three years, your rate is calculated on the last three years of experience.
In the early years, your rate depends mostly on time in business rather than on how well you run payroll. Filing accurately from the first quarter still matters, because that filing history is the record the Department uses to calculate your later rates.
Quarterly reporting and payment deadlines
You file a Quarterly Wage and Contribution Report each quarter. Reports are electronic only and are filed through the Department of Labor's online UI system, e-Services. The due dates are:
| Calendar quarter | Report and payment due |
|---|---|
| January to March | April 30 |
| April to June | July 31 |
| July to September | October 31 |
| October to December | January 31 |
If a due date falls on a weekend, the deadline moves to the next business day. Put these dates on your calendar at the start of each year, and tie each filing to the close of your payroll so the report uses final numbers rather than estimates.
What late payment costs
Unpaid UI tax accrues interest at 1.5% a month, which is 18% a year. Using the bookkeeper example, $154 left unpaid for one month carries $2.31 in interest. That looks small for one employee, but it grows with every quarter a balance stays open and with every employee on payroll. Paying on time costs far less than interest and keeps your account record clean from the start.
Setting up your account
- Confirm you meet an employer test. Check the thresholds above before your first payroll, and again after every quarter.
- Register through the Department's current online system. The Department of Labor has moved to a new online UI system, so use its current employer e-Services guides, not older screenshots or forum posts. Begin your employer registration (EMPREG) through the Department of Labor website at labor.vermont.gov.
- Gather your details. Have your legal entity information, federal employer identification number, NAICS code, and the date you first paid wages ready before you start.
- Track wages per employee per quarter. Your reports must show each worker's wages, and the $15,400 cap applies to each person separately.
- File and pay electronically by each due date. Do not plan to mail a paper report, because the Department accepts electronic filings only.
- Confirm your assigned rate. Review the rate the Department assigns, and confirm the industry-average rate applies if you are a foreign construction corporation.
Common mistakes new employers make
- Applying the $15,400 cap to the whole payroll instead of to each employee.
- Using the $7,000 federal FUTA base when calculating state tax.
- Assuming part-time or seasonal staff do not count because their quarterly pay is small.
- Waiting until year end to check whether an employer threshold has been crossed.
- Following outdated instructions after the Department's system change.
Where to get help
The Vermont Small Business Development Center offers business advising at vtsbdc.org and can help you plan payroll and startup costs before your first hire. For your rate, your registration, or a notice you do not understand, contact the Vermont Department of Labor directly. If you have multiple employees, a foreign corporation, or an unusual entity structure, a CPA or employment attorney can review your situation. Bring this guide's figures to that conversation and ask them to confirm each one.