Archive for the ‘Unemployment Law’ Category

Unemployment Law

Unemployment compensation is governed by state law. Each state has an agency responsible for unemployment compensation. Unemployment compensation was instituted in 1935 as part of the Social Security Act; however, unemployment insurance is not a totally federalized program inasmuch as each state is given the latitude, under general guidelines, to develop its own program. As a result, there is variation in the amounts actually paid to unemployed workers in different states. This benefit is funded almost entirely by the employer. Typically, the employer is taxed at least 6.2 percent of the first $7,000 earned by each employee (employees inAlaska,Alabama, andNew Jerseyare also taxed). Some states provide for a higher tax rate as well as a higher base earnings level. An experience rating, based on terminations that result in unemployment compensation claims, is also used in calculating the tax that must be paid by a specific employer. In some cases, the state tax rate may actually drop to zero if the employer has had no recent terminations resulting in claims for unemployment compensation.

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