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Unemployment Insurance: Everything You Need To Know

Unemployment Insurance: Everything You Need To Know

Also known as unemployment benefits, unemployment insurance is a type of insurance provided by the state. It provides pay-outs to those who lost their job and meet certain eligibility requirements. If you quit your job or are fired for a cause, no unemployment benefits will be given to you. The state government primarily provides the benefits and it is funded by specific payroll taxes collected for that purpose.

How Unemployment Insurance Works

The unemployment initiative exists because of a joint program between individual state governments and the federal government. Cash stipends are being provided by unemployment insurance to unemployed workers who are actively looking for a job. The Federal Unemployment Tax Act (FUTA) and state employment agencies handle the compensation to eligible, unemployed workers.

The unemployment insurance program is available for each state but there are specific guidelines outlined by federal law that needs to be followed by all states. It is because of the federal law that unemployment benefits became relatively ubiquitous across state lines. The overseer of the program is the U.S Department of Labor. They ensure compliance within each state. 

If you’re a worker and you meet specific eligibility requirements, you may receive up to 26 weeks of cash benefits per year. In order to replace half of the employee’s regular wage, on average, the weekly cash stipend was designed. The unemployment insurance is being funded by the states using taxes levied on employers. Both federal and state unemployment FUTA tax will be paid by majority of employers. FUTA tax is not required for companies that have 501(c)3 status. Minimal employee contributions to the state unemployment fund are required by three states.

Reportable income includes freelance work or jobs that were paid for in cash by the unemployment insurance.

If you’re an out of work person who did not find employment after a 26-week period, you may qualify for a benefits program that has been extended, if it is available. Extended benefits provide unemployed workers 13 to 20 weeks more of unemployment benefits. The state’s overall unemployment situation will dictate the availability of extended benefits.

Eligibility and Claim Requirements

As an unemployed person, you must meet the two primary requirements to claim unemployment insurance benefits. There are state-mandated thresholds for either earned wages or time worked in a stated base period that must be met by an unemployed individual. The eligible person must be also be identified by the state as unemployed through no fault of their own. When fulfilling these two requirements, a person may file unemployment insurance claims.

Claims can be made by individuals in the state where they worked. In order for a participant to file claims, he or she may do so via phone or on the website of the state’s unemployment insurance agency. It will take two to three weeks for processing and approval of a claim after the first application.

The participant, after approval of a claim, must either file weekly or bi-weekly reports that test or confirm their situation as an unemployed individual. To remain eligible for benefit payments, reports must be submitted accordingly.

Refusing work during a week is not allowed for unemployed workers and on each weekly or bi-weekly claim, any income that they earned from freelance or consulting gigs must be reported.

Important Things to Keep in Mind

    •    Unemployment insurance money typically lasts for 26-weeks.

    •    Unemployment insurance is also known as unemployment compensation.

    •    Unemployment insurance is not available to those who quit their job.

    •    Unemployment insurance funds are not available to self-employed workers.

    •    The unemployment insurance program is handled by the U.S Department of Labor.

For employers, here is something you need to keep in mind if you want to avoid unemployment insurance & the stressful paperwork that comes with it:

    •    You must understand the laws in your state. You may get details of the regulations from the agency that collects the tax. Learn about the kinds of layoffs or terminations that can trigger unemployment claims and avoid them as best as you can.

    •    Don’t forget to keep records of your tax payments and any charges against your unemployment insurance account by past employees carefully. Errors are usually common. If you see one, protest it and have it documented. Bolster your position as a dutiful corporate citizen by filing your tax payments on time.

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