California’s UI Rate Schedule F+ is the state’s most expensive unemployment insurance tax tier, and it remains in force for 2026. Employers pay between 1.5% and 6.2% on the first $7,000 of each employee’s wages per year, with a 15% emergency surcharge already baked into those percentages.1Employment Development Department. Contribution Rates, Withholding Schedules, and Meals and Lodging Values At the top of the range, that works out to $434 per employee annually in state UI tax alone, before any federal unemployment tax is added.
Why Schedule F+ Is in Effect
California uses eight lettered rate schedules, AA through F, keyed to the health of the state’s Unemployment Insurance Fund. Each year the fund balance on September 30 is compared to total wages paid during the fiscal year ending June 30, and the resulting ratio sets the schedule for the following calendar year.2Employment Development Department. Unemployment Insurance Rates (DE 231Z) The transitions are automatic under California Unemployment Insurance Code Section 977; no agency discretion is involved.3California Legislative Information. California Code Unemployment Insurance Code 977 – Contribution Rates
Schedule F applies whenever the fund-to-wages ratio drops below 0.8%. The “+” activates on top of Schedule F when conditions get worse still: once the ratio falls below 0.6%, every employer’s Schedule F rate is multiplied by 1.15, and the result is rounded to the nearest tenth of a percent. That multiplied figure is Schedule F+.4Employment Development Department. Explanation of the Notice of Contribution Rates and Statement of UI Reserve Account The surcharge is authorized by California Unemployment Insurance Code Section 977.5 and exists to accelerate fund recovery during deep insolvency.5California Legislative Information. California Code UIC – Section 977.5
California has been stuck here for years. The pandemic-era benefits surge drained the fund, and the state borrowed heavily from the federal government to keep paying claims. That loan is still outstanding, which is why the surcharge keeps renewing.
How Your Specific Rate Is Set
Every California employer is on Schedule F+ right now, but nobody pays a single flat rate. Where you land in the 1.5% to 6.2% band depends on your experience rating.
The EDD calculates your reserve ratio by taking the balance in your reserve account as of July 31 and dividing it by your average base payroll. Your reserve account is a running tally: all UI taxes you’ve paid in, minus all unemployment benefits charged against your account for former employees. A higher ratio puts you lower in the schedule.2Employment Development Department. Unemployment Insurance Rates (DE 231Z)
An employer with a strong reserve and few benefit charges may pay near the 1.5% floor. One with frequent layoffs and a negative reserve balance will sit at or near the 6.2% ceiling. At that ceiling, on the $7,000 wage base, the cost reaches $434 per employee per year.1Employment Development Department. Contribution Rates, Withholding Schedules, and Meals and Lodging Values
New Employers
Businesses without enough history for an experience rating are assigned a flat 3.4% rate for their first two to three years. After that, the EDD switches to a rate based on the employer’s actual claims history.6Employment Development Department. Tax-Rated Employers Benefit charges during those early years still feed the reserve calculation that will drive the experience-rated percentage later.
The Federal Credit Reduction Adds More
Schedule F+ is only the state piece. Under the Federal Unemployment Tax Act, every U.S. employer pays a 6.0% federal tax on the first $7,000 of each employee’s wages. Employers normally get a 5.4% credit for paying into their state system, bringing the effective federal rate to 0.6%, or $42 per employee per year.7Internal Revenue Service. Topic No. 759, Form 940, Employers Annual Federal Unemployment Tax Act (FUTA) Tax
California employers do not get the full credit. When a state’s federal UI loan remains unpaid across years, the FUTA credit available to its employers drops by 0.3 percentage points annually. For the 2025 tax year, California employers lost 1.2 points of credit, which added $84 per employee.8Employment Development Department. Federal Unemployment Tax Act The reduction grows with each additional year the loan is outstanding. California is the only state that still carries this debt, which is projected to reach $22 billion by year’s end.
Stack the FUTA credit reduction on top of a high Schedule F+ rate and the total unemployment-related tax burden for a California employer can clear $500 per employee per year.
Voluntary Contributions Are Not Available
In normal years, California employers can make voluntary payments into the UI system to boost their reserve balance and qualify for a lower rate. State law prohibits that during any year Schedule F+ is in effect. There is no short-term mechanism available right now to buy your rate down. The only path to a lower percentage is building a stronger reserve ratio over time through fewer benefit charges and consistent tax payments.
Checking and Protesting Your Rate Notice
Each December the EDD mails Form DE 2088, the Notice of Contribution Rates and Statement of UI Reserve Account. It shows your assigned UI rate, your reserve ratio, and the active schedule for the coming year. The official issue date is December 31, though some notices leave earlier because of bulk mailing. Rates take effect January 1.1Employment Development Department. Contribution Rates, Withholding Schedules, and Meals and Lodging Values
You can protest most items on the DE 2088 within 60 days of the issued date. File through the EDD’s e-Services for Business portal or by mail. You will need your Letter ID, your employer payroll tax account number, the specific items you are challenging, and your reasoning. A 60-day extension is available if you show good cause. The SDI rate and the ETT rate cannot be protested; both are fixed by statute.4Employment Development Department. Explanation of the Notice of Contribution Rates and Statement of UI Reserve Account
Read the notice closely when it arrives. Errors in benefit charges, payroll figures, or account balance calculations can push your rate higher than it should be, and catching them inside the 60-day window is one of the few things you actually control under Schedule F+.
Lowering Your Rate Over Time
With voluntary contributions blocked, the practical lever is your experience rating. Every unemployment claim charged to your account erodes your reserve ratio and raises your rate at the next calculation. A few habits make a measurable difference across years:
- Respond to every claim notice. When a former employee files for unemployment, the EDD sends you a notice. If the separation was for misconduct or a voluntary quit, the charges may not belong on your account, and failing to respond means the charges stand by default.
- Verify the benefit charges listed on your DE 2088 against actual claims you know about. Each uncorrected charge inflates your rate.
- Minimize layoffs when the option exists. Reducing hours, offering voluntary separations, or redeploying workers can sometimes avoid the UI claim that would otherwise follow.
None of this changes your rate overnight. Experience ratings reflect years of accumulated history and the math moves slowly. Employers who actively manage their accounts consistently pay less than those who let charges accumulate unchallenged.