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Every business in Arkansas pays an unemployment insurance tax. A business with no previous employment record in Arkansas is taxed at 3.8 percent on the first $12,000 of each employee's earnings until an employment record is established, usually within three to five years. Contribution rates range between 1.0 percent and 10.9 percent.

Each firm's employment record is determined primarily by its taxable payroll and history of employee involuntary termination. The tax is determined by past experience and the amount of the reserve-ratio. The reserve-ratio is the excess of contributions paid over benefits charged as related to payroll. The higher the reserve-ratio, the lower the tax rate.