Unemployment Compensation Basics

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In this time of uncertainty, many employers are forced to make difficult staffing decisions. Already, thousands of employers have had to let employees go, as they find themselves without enough income to support their previous staffing levels. 

During this time, employees are finding they may need to turn to unemployment compensation when perhaps they’ve never done so before. And some employers are learning more about how unemployment compensation works when, until now, it’s simply been something they took for granted and paid the tax for without further consideration.

Here’s how unemployment insurance and unemployment compensation work in the United States:

  • Employers are mandated to pay into unemployment via an unemployment tax. The amount employers pay is based on the number of unemployment claims they have had and their total number of employees. This mandate comes from the Federal Unemployment Tax Act (FUTA). The payments are made at both the federal and the state level.
  • Unemployment tax money collected from employers goes into the Unemployment Compensation Trust Fund, where the money is held until it is used for payments of unemployment claims.
  • Unemployment tax money collected at the state level is typically used to actually pay for unemployment compensation for individuals. The payout amount varies by state regulation; some states offer only basic amounts to cover essentials, while others offer payouts that are a percentage of the person’s previous pay up to a maximum payment cap. The total amount of time the payouts last is typically 6 months but may vary, especially in special circumstances. They may also vary based on an individual’s work history. Continue reading here…

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Source: HR Daily Advisor