About Unemployment Insurance in the United States

Filed under: Features,Labor,Tools, Resources & How To |

About Unemployment Insurance in the United States

If you lost your job through no fault of your own, you may be eligible for unemployment compensation. The program is intended to keep you up on your feet and putting food on the table until you can find your next source of income. However this gravy train has a time limitation and applying for a new job every week is a baseline requirement.

Unemployment compensation began in 1932 in the state of Wisconsin. Other states were encouraged to adopt the concept when the federal government passed the Social Security Act of 1935. Today all 50 states (plus the District of Columbia, Puerto Rico and United States Virgin Islands) have unemployment insurance programs.

Who Pays For It?
Unemployment compensation is a joint effort run by federal and state agencies. Funding is generated through employer payroll taxes. In general, employers must pay both state and federal unemployment taxes if:

1. They pay wages to employees totaling $1,500 or more in any quarter of a calendar year
OR
2. They had at least one employee during any day of a week during 20 weeks in a calendar year regardless of whether they were consecutive. (Some state tax regulations differ from the federal requirement)

The Internal Revenue Service is empowered to collect the tax by the Federal Unemployment Act (FUTA). FUTA covers the cost of administering unemployment insurance and job service programs in all states. When unemployment levels are high, FUTA also pays one half the cost of extended benefits and provides a fund for states to borrow against to pay benefits when necessary.

The FUTA tax rate is 6.2% of taxable wages on the first $7,000 paid in wages to each employee during a calendar year. However if it is paid on time, the employer receives an ‘offset credit’ of up to 5.4% regardless of the rate they pay their state. This brings the percentage down to 0.8 or $56 per employee per year. For example a business with 100 employees is paying a minimum of $5,600 annually to FUTA to fund federal unemployment compensation.

Individual states raise their own funds and run their own programs based on the broad guidelines set by the federal government for eligibility and coverage.

Who Is Eligible?
Part-time, temporary and self-employed workers do not qualify for unemployment insurance. In general, this means you were a full-time employees and were laid off.

“Just Cause”
The key phrase defining eligibility is losing your job “through no fault of your own”. However, you may have been fired from your job without just cause. You may have even quit voluntarily WITH just cause ( for example: a supervisor may have been treating you unfairly for an extend period of time which eventually made your work experience unbearable).

In these cases, the worker has to file for unemployment and will usually be required to subsequently file an appeal. If the appeal seems reasonable, the employer and employee will be scheduled to appear before a judge and plead their cases.

You must also meet state requirements for wages earned or time worked during an established period of time (“base period”) to be eligible for benefits. For most states, the base period is usually the first four out of the last five completed calendar quarters prior to the time the claim is filed.

How Much & How Long
Every State has a maximum benefit however they are generally based on reported covered quarterly earnings. The length and value of benefits are determined by the amount of earnings and the number of quarters worked.

The average weekly payment is 36% of the worker’s average weekly wage.

Unemployment benefits aid begins. Line of men inside a State Employment Service office at San Francisco, Calif., waiting to register for benefits on one of the first days after the office opened in Jan. 1938.These workers will receive dfrom $6 to $15 per week for as long as 16 weeks. Twenty-two states begin paying unemployment compensation as national unemployment reached 10 million, 19% of the workforce. Photo: Lange, Dorothea,/Library of Congress

Unemployment benefits aid begins. Line of men inside a State Employment Service office at San Francisco, Calif., waiting to register for benefits on one of the first days after the office opened in Jan. 1938.These workers will receive dfrom $6 to $15 per week for as long as 16 weeks. Twenty-two states begin paying unemployment compensation as national unemployment reached 10 million, 19% of the workforce. Photo: Lange, Dorothea,/Library of Congress

Federal rules are established by the United States Department of Labor, Employment and Training Administration. The maximum period for receiving benefits for most states is 26 weeks. However in periods when economic conditions create high unemployment rates, benefits may be extended. As a result of the American Recovery and Reinvestment Act passed by Congress in February 2009, it may be possible to receive unemployment benefits for up to 99 weeks. This extended period of compensation may also depend on State legislation.

Where Do You Start?
If you’ve lost your job through no fault of your own or feel you were terminated without just cause, you will need to file an unemployment compensation claim with your State unemployment agency. You can usually do this on-line, however it can also be done via phone or mail service.

List your business in the premium web directory for free This website is listed under Human Resources Directory