Business

A Primer to Unemployment Insurance

When a company does not succeed, the owners are left with no choice but to close-up shop. Where do employees fall into this picture? That’s right – jobless. This sudden change of employment status shakes the footing of any ex-employee. With the materialization of unemployment insurance, recently jobless people can have financial support while looking for a new job. 

Find out more about unemployment insurance below.

When Did it Start?

This insurance type was conceived in 1935 when the government of the US mandated the collection of unemployment tax. This reserve fund is controlled by the state to help the unemployed and comes from the taxes that companies pay for their workforce.

Who Pays for It?

It is under statutory law for all types of businesses to pay for financial aid in the form of taxes:

  1. State Unemployment Insurance (SUI). This is part of a company’s quarterly tax that is paid by the company alone, or with some contribution from the workforce. This rule is different for each state.
  2. Federal Unemployment Tax Act (FUTA). Solely settled by the employer in a quarterly basis.

The Process

A newly hired staff must be officially listed to the SUI, FUTA, or both. When you receive your compensation, part of the tax deducted on your payroll sometimes go to the reserve fund. If you leave the company or was terminated with due process, you are eligible to apply for financial aid under unemployment insurance. However, if you were terminated because of a disciplinary issue, you will not reap its benefits. Employers should keep everything documented for their security.

If you get unemployed at will, all you need to do is apply for the insurance and wait for its approval. Once your petition is approved, the financial aid will come from your previous employer’s tax fund. However, if you were terminated because of ill will, an investigation with the state will commence.

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