Michigan Nursing Home Administrator (NHA) Practice Exam

UIA contributions are based on what kind of payroll?

1. Net payroll

2. Taxable wages

3. Gross payroll

4. Hourly wages

The correct answer is: Gross payroll

UIA contributions, which refer to the Unemployment Insurance Agency contributions, are calculated based on taxable wages. This means that these contributions are determined from the earnings on which unemployment insurance taxes are assessed. When an employer calculates UIA contributions, it is essential to consider the total amount paid to employees that falls within the parameters set by state law for taxable income. This typically reflects the gross wages without taking into account any pre-tax deductions or other reductions that would lower the gross pay that is reported. Gross payroll encompasses all wages before any deductions, such as taxes or retirement contributions; therefore, the basis for UIA contributions is essentially reflective of the wages that are subject to taxation and are recognized as the foundation for determining the level of unemployment benefit support. Other options, while related to payroll in some capacity, do not accurately represent the basis for UIA contributions. For example, net payroll refers to the take-home pay after deductions, which is not used for calculating UIA contributions, while hourly wages represent a method of compensation but do not solely determine contributions without consideration of the total taxable wages.