The unemployment compensation program in the Virgin Islands is administered by the Department of Labor Unemployment Insurance Service, in accordance with the provisions of the Virgin Islands Unemployment Insurance Act. The primary functions of this Agency are paying unemployment benefits to eligible unemployed workers and collecting taxes from liable employers.

This handbook (Adobe Acrobat printable format) has been prepared to provide a simplified explanation of the tax, benefit, and appeals provisions of the unemployment insurance program of the Virgin Islands. It does not take precedence over the law or regulations, and is subject to change at any time as a result of statutory amendments, regulatory revisions, court decisions, federal requirements, and Agency procedural changes.

This handbook   (Adobe Acrobat printable format) is intended to provide employers in the Virgin Islands with information necessary to protect their experience rating accounts and to inform them of their rights and responsibilities under the law.

Background of Unemployment Compensation

Unemployment Compensation was first begun as a national program during the Great Depression of the 1930's as part of a group of social insurance programs. Its purpose was and is to provide compensation to workers who are unemployed through no fault of their own until, normally, they are able to go back to work. The amounts payable as benefits are intended to cover non-deferrable expenses during unemployment, such as housing, food, clothing, and necessary transportation.The benefits paid help maintain purchasing power which many consider the key to business prosperity. In this way, unemployment compensation promotes economic stability and helps to stave off the downward cycles that lead to economic depressions. Businessmen credit this program with playing an important part in bringing about quick recoveries from business recessions.Your contributions (taxes) paid to the Virgin Islands Government are used exclusively for payment of unemployment benefits to individuals who are eligible under the law. Your Federal unemployment taxes paid under (FUTA) are used primarily to finance the administration of the unemployment insurance and employment service programs in the Virgin Islands. For the purposes of the unemployment compensation and employment service programs, the Virgin Islands is treated as a state.

Contributions

Who is liable?

Employing Units, for which one or more individuals perform services at any time in "employment," as defined in the law, are normally subject to contributions. The services may be performed full-time or part-time, by adults or minors.If individuals perform personal or domestic service in a private home or in a local college club, fraternity, or sorority and the aggregate payroll in that location equals or exceeds $500.00 in remuneration in a calendar quarter in the current or preceding calendar year, the employees are in covered employment and their wages are normally subject to contributions.

Wages

The term "wages" for the purpose of unemployment insurance under the Virgin Islands law means any remuneration for personal services. The term includes tips, commissions, bonuses, the cash value of meals, lodging, laundry, and other means of payment for employment. Wages are reportable by employers in regard to the quarter when paid.The following payments are a few examples of those not considered to be wages

• The employer's share of contributions to a fund under a plan or system for retirement benefits or health and life insurance.
• Courtesy discounts on purchases.
• Sick pay paid under a third party plan or system.
• Travel expenses actually incurred and paid.

Household Employee Coverage

The Virgin Islands law provides unemployment insurance protection for household employees, which is also financed by their employers normally through contributions, similarly to other employers.If you pay less than $500.00 in cash wages in any calendar quarter, you have no liability for that quarter. You must still file the quarterly report showing no employees. If you do not intend to have employees in the future, you can request that your account be terminated. You will no longer be required to file reports as an employer.  

Exempt Services

Examples are given below of types of work which are not subject to contributions or reimbursements.

• Services performed by an individual under 18 years of age as a babysitter.
• Services performed not in the course of an employer's trade or business.
• Services performed by an individual in the employ of a son, daughter, or spouse. Service by a child under 21 in the employ of a parent.
• Service as an insurance solicitor or agent if entirely on commission.
• Services performed in the employ of a church or convention or association of churches or an organization which is operated primarily for religious purposes.
• Workers who are hired as part of an unemployment work-relief or training program assisted or financed by any Federal or State agency or political subdivision thereof.
• Services performed in the employ of a foreign government.
• Employees of international organizations.

The foregoing list is not complete. If you have any questions about coverage and exemption of particular services, please contact the Agency.

Voluntary Election of Coverage

An employing unit not otherwise subject to the coverage provisions of the law may elect to become a covered employer. Such election must be requested in writing and approved by the Agency. Such election must cover an initial minimum period of two calendar years. Continuing coverage is automatic yearly thereafter, unless action is taken by the employer or by this Agency to cancel the agreement. Employers who elect to be covered are subject to all provisions of the law.

Date of Liability

An employer becomes liable when he first pays wages for covered services in the Virgin Islands, and the liability then applies to the entire calendar year beginning January 1.

Termination of Coverage

An employer can terminate his liability when the coverage requirements are no longer met under the law. The agency should be notified in writing when that occurs.Employers who become liable by voluntary election may not terminate coverage until two full calendar years have passed since election of coverage.

Federal Unemployment Tax Act (FUTA)

Most employers liable for state unemployment taxes are also liable for taxes under the Federal Unemployment Tax Act (FUTA). This FUTA tax is used to pay the costs of operating the Unemployment Compensation Programs and the Public Employment Service in the State and Federal Governments and also to repay the Federal debt for extended benefits and the Federal Supplemental Compensation Program.The unemployment compensation system is a joint program between the Federal and State Governments.Employers who pay State unemployment taxes in the form of contributions receive an offset credit on their Federal unemployment taxes if the State is certified by the US Secretary of Labor as satisfying the Federal law. This is how the process works:

Base Federal Unemployment Tax Rate 6.0%
Surtax for Fund Building +.2%
Total Federal Unemployment Tax Rate 6.2%The Federal offset credit is 90.0% of the Federal Base Tax.6.0% X 90.0% = 5.4%The total Federal unemployment tax would be reduced by the credit as follows:Total Federal Tax 6.2%
Offset credit -5.4%
Net Federal Tax .8%

Experience Rating

How and When You Qualify

Experience rating is a system that relates the amount of contributions to be collected from employers to the cost of benefits paid to employees. An experience rating account is established for all registered employers. Lower rates are assigned to employers whose experience with their employees’ risk of unemployment costs less, and higher rate to those whose experience costs more. Experience rating is designed to maintain an adequate reserve of funds to finance potential benefit payments in the near future. Employers newly subject to the law will be liable to pay contributions at a rate of 1.0% of taxable wages until they become eligible for contribution rates based on their experience. Employers become eligible for such rates after they have completed 12 calendar quarters of such experience by September 30 of any given year.

How your tax rate is computed?

On a yearly basis, by December 31, the computed Current Reserve (The difference between contributions paid and benefits charged in an employer's experience rating account during a 12 quarter period ending September 30) of each employer's experience rating account is divided by the total wages paid for the same period to determine a reserve ratio. The lower the reserve ratio is the higher the assessed contribution rate and vice versa. Rates vary from a low 0.0% to a high 6.0%. The formula: Current Reserve/Total Wages = Reserve Ratio.If benefits charged against an employer's experience rating account are less than the contributions paid to it, then the current reserve balance is positive and the resulting reserve ratio also positive. On the other hand, if the benefits charged against an employer's experience rating account are more than the contributions paid to it, then the current reserve balance is negative and the resulting reserve ratio also negative.

Application for Rate Re-determination

The contribution rate will be conclusive and binding unless written application setting forth the reasons for review and re-determination is filed with this Agency within 15 days after the notice was mailed or delivered to the employer's last known address.

Reimbursing Employers

Governmental entities and nonprofit organizations may choose either to pay contributions quarterly or to reimburse the Agency for benefits paid to their former employees. The option chosen will remain in effect normally for a minimum of two calendar years and can be changed only by submitting a written request to the agency at least 30 days before the beginning of a new taxable year.A reimbursing employer is billed quarterly when benefit payments are to be reimbursed, with an itemized listing that shows individual charges. These charges are binding unless the employer files a request for review and re-determination in writing, setting forth the charges to which he is objecting and the basis for the objection within 15 days of the mailing date. The bill must be paid within 30 days to avoid interest and penalty charges.Employers electing the reimbursement option will still be required to file contribution and wage reports each quarter similarly to employers liable for contributions. The reports will be used, however, only for statistical purposes.

Records, Reports & Audits

Registration as Employer

All employing units paying wages in the Virgin Islands are required by law to (1) notify the Agency within 5 days after the first employee starts to work and (2) to register as a covered employer. Registration forms are furnished upon request for this purpose.The registration is used to provide the Agency with the necessary information with respect to ownership, location, and type of business needed to make a determination of an employing unit's liability.A registration and status report is also required when an employer acquires all or part of the business of another employer and when there is any change in the type of business or entity or business status.

Employment RecordsThe law requires that all employing units keep accurate and up-to-date records on all employees.These records must show:

• Each employee's name and social security number.
• The date each employee was hired, separated or furloughed, rehired, or returned to work after a temporary layoff.
• The approximate age or year of birth for each employee.
• Citizenship of each employee.
• The reason for each separation or layoff.
• The period covered by the payroll record.
• The rate of pay (e.g. hourly, daily, piece rate).
• The total wages paid to each employee for each pay period showing (1) cash remuneration, (2) the cash value of other remuneration, including gratuities and tips, and (3) expenses incurred by each employee for which deduction from wages is claimed.
• Full-time scheduled working hours.
• Record of daily attendance.

NOTE: The law requires employers to make their records available and to furnish such information to authorized representatives of the Agency as it may require and in the manner and at the times it may require.

Quarterly Wage and Contribution Report

Contributing and reimbursing employers are required to file an Employer's Quarterly Wage and Contribution Report to report wage and tax information for a calendar quarter. The report and proper remittance (payable by contributing employers) are due at the end of the month following the end of a completed calendar quarter as follows:

The Agency has no authority to grant extensions of time to file quarterly reports or to pay contributions. Reimbursing employers are required to make payments in lieu of contributions within 30 days after billed.Employer's quarterly reports are mailed to every employer in active status. The forms are preprinted with the employer's name, address, account number, quarter and year to be reported, due date, the tax rate and taxable wage base to be used in computing the tax due. If for any reason you fail to receive this form, you should request that a form be mailed to you. Whenever possible, you should use the preprinted form in order to insure correct processing of your report.

FAILURE TO RECEIVE THIS FORM DOES NOT RELIEVE YOU OF THE RESPONSIBILITY FOR FILING THE REPORT.

Extreme care should be taken to insure that the employee's name, social security number and total wages are correctly and clearly reported, because the information provided by the employer is used in processing claims for unemployment benefits. Use the instructions on the back of the Employer's Quarterly Wage and Contribution Report as a guide to filling out the form.If you keep your payroll records on magnetic tape or diskette and would like to report to the Agency in that manner, please contact the Agency so that appropriate arrangements may be made.Employers who discontinue or sell their business must file reports within 20 calendar days after such event occurs.

Interest and Penalty

Contributions and payments in lieu of contributions not paid when due are subject to interest at the rate of 9.0% per annum or fraction thereof until paid. In addition to the interest imposed for delinquent payments, a penalty is assessed of $5.00 for each month, or fraction of thereof, of delinquency, unless good cause is found for such delinquency.Carelessness in preparing and filing report is insufficient as a ground for waiver of a penalty. Requests for waiver must be submitted to the Agency in writing.

Injunctions

 In extreme cases where the Agency cannot secure compliance, it may petition the courts to issue an injunction prohibiting the employer from operating his business in the Virgin Islands until the employer has complied with the law.

Audits and Employer Records

In order to insure compliance with the tax provisions of the law, field audits are conducted on employers' records periodically. An audit may disclose an underpayment or overpayment of contributions by an employer. In cases of underpayment, the field auditor will collect additional contributions and interest due. In cases of overpayment, the field auditor will assist the employer in applying for a refund or credit adjustment.All field auditors carry identifying documents issued by the Agency. Do not hesitate to ask for proper identification.

Independent Contractors

The Agency will determine whether individual workers are employees or independent contractors. The law does not cover an independent contractor. The ordinary rules of the common law relative to "master and servant" do not apply in defining an employment relationship. Service will be considered covered, unless the individual performing such service can be clearly shown to be an independent contractor. 

Reciprocal Coverage Agreement

If, after applying all the above localization tests to a given set of circumstances, the individual's service is not found to be clearly subject to any one state law, the employer may elect to cover in one state all of the individual's service under a reciprocal coverage agreement. Such an agreement must be approved by the states involved. Contact the Agency for more information if you have workers who perform service in more than one state, including the Virgin Islands.

Localized and Non-Localized

The definitions of "employment" are essentially uniform in state unemployment compensation laws. The objective 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 coverage provisions are offered.First, it is necessary to determine whether the service is entirely 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 of operations is and whether he performs any service in that state. If he has no base of operations, or if he performs no service in the state in which his base of operations is located, then it is necessary to look to the state from which his service is directed or controlled. It is only when coverage is not determined by any of these tests that residence becomes a factor. 

Combined Wage Claim

If an individual has worked in more than one state, he may combine all of the wages earned in his base period either to qualify monetarily for benefits or to increase the amount of benefits to which he would be entitled. 

Interstate Claim

If an individual earned his base period wages in one state and later moved to another State where he became unemployed, he may file claims in a certain manner whereby he can use his wages to establish a claim and receive benefits if he is otherwise eligible and not disqualified.

 Benefit Payment Program

In the Virgin Islands, as in other states, employers pay the entire cost of regular Unemployment benefits and a share of the cost of extended benefits. No part of an employer's contributions (taxes) may be withheld from workers' wages. Since it is your contribution that finances compensation payable to eligible jobless workers, it is desirable for you to become familiar with the requirements of the benefit payment program under the Virgin Islands Law.The unemployment compensation program is designed to assist workers unemployed through no fault of their own to meet non-deferrable living expenses for themselves and their families, thereby allowing them to search for work commensurate with their skills, training, and experience. Benefit payments also help to sustain the economy of the Virgin Islands by maintaining purchasing power within the population.You can help to reduce your contribution rate, or to keep it from rising unduly, by providing when requested or on your own initiative, timely, pertinent, and accurate information about individuals claiming unemployment benefits.

Note: The 2006 Maximum Weekly Benefit Amount is $416.00

Requirements for Entitlement

To qualify for benefits, an individual must have (1) worked in covered work during his base period, (2) earned a minimum amount of wages in at least two calendar quarters, (3) become unemployed through no fault of his own, (4) filed a valid claim for benefits and registered for suitable work with the Agency, and (5) be found eligible, and not be disqualified. Each of those conditions is described briefly below.

Coverage

A worker must have performed service for remuneration for an employing unit that is covered under the Virgin Islands Unemployment Insurance Act, and the service performed must be covered, that is, not a type of service that is exempt under the law. If exempt, the service may, nevertheless, be covered if the employer so elected.

Qualifying Wages

A worker must have earned remuneration that is covered and treated as wages under the law, in an amount not less than $858.00 in the single calendar quarter of his base period in which he earned the highest amount of wages. In addition, his total base period wages must be at least one and a half time his high quarter wages.

Unemployed

The individual claiming benefits must either be not working at all or working for a number of hours that are less than the customary hours for his occupation. If a claimant does work part-time, he must report all of his earnings to the Agency WHEN EARNED, NOT WHEN PAID.

Entitlement

The unemployed individual must not have quit his job voluntarily without good cause connected with his work, and he must not have been discharged or suspended for misconduct connected with his most recent work. In addition, the individual must not have failed, without good cause, to apply for or accept available suitable work to which he has been referred.An individual claiming benefits must be physically able to work. The program is not intended to compensate individuals who are sick, or disabled and, therefore, unable to look for or accept suitable work.A claimant must be actively seeking suitable work by doing whatever a prudent person would do if he were seriously interested in finding work.A claimant must not be unemployed because of a labor dispute in active progress where he formerly worked. He must not be an alien who is not authorized to work in the Virgin Islands, a school employee unemployed between school years or terms and who has a reasonable assurance of returning to work when the school year or term begins again, or an athlete unemployed between sport seasons and who has a reasonable assurance of reemployment in the following sport seasons.A claimant's benefit amount may be reduced, even if he is otherwise qualified, by the receipt of certain types of income such as back pay awarded for wrongful separation, pensions based on previous work, and pay in lieu of notice of separation. If such income equals or exceeds the benefit amount otherwise payable, no benefit will be paid for the week affected.A claimant may be disqualified for fraud in connection with a claim, such as deliberately not reporting earnings for a week claimed as totally unemployed. Amounts received as benefits would become overpayments that must be repaid by the claimant by one means or another, either through deductions from the weekly benefit check, or a lump sum, or partial payments, if the claimant is not currently receiving benefits.

Appeals

If you believe a claimant should not be allowed benefits, either initially or for any week(s) during a claim series, you may appeal within 10 days from the date of the determination by submitting a request in writing to the Agency with the necessary information for a hearing. If an appeal decision allows benefits and you disagree, you may appeal further to a District Court within 30 days from the date of the decision. See the notice of appeal rights furnished with each determination or appeal decision, especially the time limits on filing appeals.

Telephone Hearings

When the employer and claimant are in separate locations, especially in cases involving interstate claims, e.g., Virgin Islands and New York, and it is impossible for both parties to make face to face contact each party will be given advance notice to the hearing. The parties will give testimony over the phone and may be cross-examined in the same manner. The telephone hearing will be conducted and controlled by an Appeal Examiner.