What Is Unemployment Insurance?

When a worker has become involuntarily unemployed, she is eligible for unemployment insurance. The coverage insures that an employee who has been laid off by her employer can apply for temporary compensation.

Businesses that hire employees (defined as people who provide services in exchange for wages) are required to carry unemployment insurance. An employee’s pay is never deducted nor taxed for unemployment insurance. These funds are available because companies have to pay taxes on unemployment insurance for all working employees. The amount paid into unemployment insurance is determined by each state. Percentages can be as high as 5 percent of the total payroll. The state and local agencies pay workers a percentage of their income once they become eligible for unemployment benefits.

This insurance has been put into place to help workers by supplying them with a short-term income. The Department of Labor determines the eligibity, but in most cases, workers have been laid off due to no fault of their own. While looking for employment, they may be eligible to receive these short-term unemployment benefits. In order to maintain these benefits, the unemployed worker must comply with all state and local requirements.

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