Unemployment Compensation

Introduction to Unemployment Compensation

The unemployment insurance program was started in the United States in 1935. It was started as part of the Social Security Program. Funding for the unemployment insurance program is shouldered by employers who must pay a federal levy based on the number of full-time employees they have as well as a a state levy.  The Federal Unemployment Tax Act (FUTA) tax rate is 6.25% for wages paid up to $7,000 per employee. However, it is important to note that businesses that pay State Unemployment Taxes in a timely manner will receive a credit of 5.4%.  The Department of Labor estimates the burden on business is approximately $56.00 per year per worker.

In 1987, unemployment benefits were required to be claimed on Federal Tax returns as income. Prior to this, benefits were often taxed at the state level but not at the federal level.

States administer the unemployment programs for those out of work.  Unemployment compensation typically does not cover part time workers or those who are self employed.  In general, unemployment compensation does not cover temporary employees either. Only those employees who were let go from their job through no fault of their own are eligible to collect unemployment. It typically takes two (2) weeks to be approved. All persons collecting unemployment compensation must be actively seeking work.

Source: US Department of Labor

Additional Resources

State Unemployment Insurance

The Federal-State Unemployment Insurance Program provides unemployment benefits to eligible workers who are unemployed through no fault of their own (as determined under state law), and meet other eligibility requirements of state law.

Disaster Unemployment Assistance (DUA)
Disaster Unemployment Assistance provides financial assistance to individuals whose employment or self-employment has been lost or interrupted as a direct result of a major disaster declared by the President of the United States.

Unemployment Compensation for Federal Employees
The Unemployment Compensation for Federal Employees program provides benefits for eligible unemployed former civilian federal employees.

Unemployment Compensation for Ex-Servicemembers
The Unemployment Compensation for Ex-Servicemembers program provides benefits for eligible ex-military personnel.

Extended Benefits
Extended Benefits are available to workers who have exhausted regular unemployment insurance benefits during periods of high unemployment.

Trade Readjustment Allowances (TRA)
Trade Readjustment Allowances are income support to persons who have exhausted Unemployment Compensation and whose jobs were affected by foreign imports.

Self-Employment Assistance
Self-Employment Assistance offers dislocated workers the opportunity for early re-employment.

Source: US Department of Labor