Oregon Construction Contractors (CCB) Practice Test

The state unemployment tax rate varies based on what factor?

1. The financial status of the contractor

2. The history of unemployment claims against the employer

3. The number of employees hired

4. The type of business engaged

The correct answer is: The history of unemployment claims against the employer

The correct choice reflects the way in which the state unemployment tax rate is determined based on the employer's history of unemployment claims. This means that if a contractor has a higher number of unemployment claims made by former employees, their unemployment tax rate may increase. Conversely, if they have a lower claim history, they may benefit from a lower tax rate. This system is designed to incentivize employers to maintain stable employment levels and reduce layoffs, as it places some burden on their taxes based on their claims experience. The financial status of the contractor, while potentially relevant to their capacity to pay taxes, does not directly influence the unemployment tax rate itself. The number of employees hired can impact the overall unemployment tax contribution but is not a direct factor in determining the rate set by the state unemployment system. Similarly, the type of business engaged does not inherently alter the tax rate; it is rather the specific claim history that has a direct and quantifiable effect on the rates imposed.