As an employer in the Commonwealth of Virginia, you are required to comply with specific unemployment insurance (UI) laws. Fulfilling these responsibilities protects your business from fines and penalties, ensures eligible workers receive unemployment benefits when needed, and helps stabilize the local economy during economic downturns.
Providing Separation Reports
When an employee is let go, employers must provide a separation report, which states the reason for separation. These reports help VEC decide if a claimant qualifies for unemployment benefits. All employers subject to UI law must provide timely, accurate separation reports. Failure to respond to requests for separation information can result in penalties and loss of appeal rights.
Paying Taxes
Any employer currently liable for Federal Unemployment Tax is also liable for unemployment tax in Virginia. General employers are liable if they:
- Have a quarterly payroll of $1,500 or more, or
- Employ someone for at least 20 weeks (about 4.5 months) in a calendar year
Agricultural, Domestic, and 501C3 Non-Profit employers have different thresholds for liability. You are also liable if you acquire a business that is liable at the time of the acquisition.
Reimbursable vs. Contributory (Taxable) Employers
Virginia law allows certain employers—mainly government agencies and qualifying 501(c)(3) nonprofits—to choose between two methods of financing unemployment insurance benefits:
1. Contributory (Taxable) Method
- Most employers use this method.
- You pay quarterly unemployment taxes into the Unemployment Insurance Trust Fund.
- Your cost is based on your payroll and assigned tax rate, not on the exact benefits paid to your former employees.
2. Reimbursable Method
- Available to governmental entities and 501(c)(3) nonprofits.
- Instead of paying quarterly taxes, you reimburse the Virginia Employment Commission (VEC) for your share of actual benefits paid to your former employees.
- Costs are based on the base period used to establish the claim—either the first 4 of the last 5 completed calendar quarters before the claim, or the last 4 of the last 5 if the first method doesn’t qualify the claimant.
- You are billed for your percentage of the benefits paid, based on your share of the wages in that base period.
Important for Reimbursable Employers:
- Bills must be paid in full by the due date—even if you’re appealing charges or reporting identity theft.
- Winning an appeal means you’ll get a credit only after the claimant repays the overpayment or it’s waived.
- Confirmed identity theft charges will be credited back to you.
Classifying Workers
Workers can either be classified as employees or contractors. As an employer, you are required to correctly classify your workers, as this classification helps determine their eligibility for unemployment benefits. Employers who misclassify workers may be subject to penalties under Section 60.2-513 of the Virginia Unemployment Compensation Act.
Required Posters
All Virginia employers have a legal obligation to post certain notices for their employees. These include the Job Safety and Health Protection poster, the Earned Income Tax Credit IRS publication, the Workers' Compensation Notice, and more.
Submitting Claim Information
Employers are required by law to submit all UI claim information to the VEC electronically, including separation reports.
You can submit information electronically through our Employer Self Service (ESS). To enroll in ESS, you must first register your business via iReg.
Your enrollment in ESS also allows the VEC to quickly notify you when an unemployment claim has been filed against your company, and your response to any potential claim helps us identify fraudulent behavior and prevent the theft of your tax dollars.
