periods of employment. Funds for unemployment compensation are derived
from a federal payroll tax based upon the wages paid to each employee,
up to an established maximum. The major portion of this tax is refunded
to the individual states, which operate their unemployment compensation
programs is accordance with minimum standards prescribed by the federal
government.
While not required by law, in some industries
unemployment compensation is augmented by supplemental unemployment benefits
(SUBs) financed by the employer. These benefits were introduced in 1955
when the United Auto Workers successfully negotiated a SUB plan with the
auto industry which established a pattern for other industries. This plan
enables an employee who is laid off to draw, in addition to state unemployment
compensation, weekly benefits from the employer that are paid from a fund
created for this purpose. Many SUB plans in recent years have been liberalized
to permit employees to receive weekly benefits when the length of their
workweek is reduced and to receive a lump-sum payment if their employment
is terminated permanently. The amount of these benefits is determined by
length of service and wage rate. Employer liability under the plan is limited
to the amount of money that has been accumulated within the fund from employer
contributions based on the total hours of work performed by union members.
In the United States, the unemployment
insurance program is based on a dual program of federal and state statutes.
The program was established by the federal Social Security Act in 1935.
Much of the federal program is implemented through the Federal Unemployment
Tax Act. Each state administers a separate unemployment insurance program,
which must be approved by the Secretary of Labor, based on federal standards.
The state programs are explicitly made applicable to areas normally regulated
by laws of the United States. There are special federal rules for nonprofit
organizations and governmental entities. Which employees are eligible for
compensation, the amount they receive, and the period of time benefits
are paid are determined by a mix of federal and state law.
To support the unemployment compensation
systems a combination of federal and state taxes are levied upon employers.
State employers are normally based on the amount of wages they have paid,
the amount they have contributed to the unemployment fund, and the amount
that their discharged employees have been compensated from the fund. Any
state tax imposed on employers (and certain credits on that tax) may be
credited against the federal tax. The proceeds from the unemployment taxes
are deposited in an Unemployment Trust Fund. Each state has a separate
account in the Fund to which deposits are made. Within the fund there are
also separate accounts for state administrative costs and extended unemployment
compensation. During economic recessions the federal government has provided
emergency assistance to allow states to extend the time for which individuals
can receive benefits. This has been accomplished by transferring money
to a state from its Extended Unemployment Account by passing a temporary
law authorizing the transfer. The ability of a state to tap into this emergency
system is usually dependent on the employment rate reaching a designated
percentage within the state or the nation.
Some states provide addition unemployment
benefits to workers who are disabled. Financing for the California disability
compensation program comes from a tax on employees. The Railroad Unemployment
Insurance Act provides unemployment compensation for workers in the railroad
industry who lose their jobs. Federal Unemployment Tax. Unemployment insurance
is a Federal-State program jointly financed through Federal and State employer
payroll taxes. Generally, employers must pay both State and Federal Unemployment
taxes if: (1) they pay wages to employees totaling $1,500, or more, in
any quarter of a calendar year; or, (2) they had one employee during any
day of a week during 20 weeks in a calendar year, regardless of whether
or not the weeks were consecutive. However, some State laws differ from
the Federal law and you should check with your State Employment Security
Agency to learn the exact requirements. Federal Unemployment Tax. The Federal
Unemployment Tax (FUTA), paid to the Internal Revenue Service (Form IRS
940), covers the costs of administering the Unemployment Insurance and
Job Service programs in all States. In addition, FUTA pays one-half of
the cost of extended benefits and provides for a fund from which States
may borrow, if necessary, to pay benefits. State Unemployment Tax. The
State Unemployment Tax, paid to State Employment Security Agencies, is
used solely for the payment of benefits to workers who have lost their
through no fault of their own. In addition, these taxes are used to pay
one-half the cost of extended benefits.
Domestic employees. Employers of domestic
employees must pay State and Federal unemployment taxes if they cash wages
to household workers totaling $1,000, or more, in any calendar quarter
of the current or preceding year. A household worker is an employee who
performs domestic services in a private home, local college club, or local
fraternity or sorority chapter. Employers of agricultural employees must
pay State and Federal unemployment taxes if: (1) they pay cash wages to
employees of $20,000, or more, in any calendar quarter; or (2) in each
of 20 different calendar weeks in the current or preceding calendar year,
there was at least 1 day in which they had 10 or more employees performing
service in agricultural labor. The 20 weeks do not have to be consecutive
weeks, not must they be the same 10 employees, nor must all employees be
working at the same time of the day. Tax rate. The FUTA tax rate is 6.2%
of taxable wages. The taxable wage base is the first $7,000 paid in wages
to each employee during a calendar year. Employers who pay the State unemployment
tax, on a timely basis, will receive an offset credit of 5.4% regardless
of the rate of tax they pay the State. Therefore, the net Federal tax rate
is 0.8%. The issue of the Federal Unemployment Tax Act is that whether
the national employment the security system should be reformed and updated.
The FUTA came into existence in 1939 to guarantee financing for a national
employment security system. The idea was for employers to pay the costs
of administering the unemployment compensation and national job placement
system. In return, employers would receive assistance in recruiting new
workers and the unemployed would be able to find jobs faster.
Unemployment insurance pays benefits to
qualified workers who are unemployed and looking for work. Unemployment
payments (compensation) are intended to provide an unemployed worker time
to find a new job equivalent to the one lost without major financial distress.
Benefits are paid as a matter of right and are not based on need. In the
United States, the unemployment insurance program is based on a dual program
of federal and state statutes. The program was established by the federal
Social Security Act in 1935. Much of the federal program is implemented
through the Federal Unemployment Tax Act. Each state administers a separate
unemployment insurance program within minimum guidelines established by
Federal Statute. Who is eligible, the amount they receive, and the period
of time benefits are paid are determined by each state. To support the
unemployment compensation systems a combination of federal and state taxes
are levied upon employers. The proceeds from the unemployment taxes are
deposited in an Unemployment Trust Fund. Each state had a separate account
in the Fund to which deposits are made. The Federal Government provides
funding for benefits for unemployed federal employees and ex-military personnel.
The Railroad Unemployment Insurance Act provides unemployment compensation
for workers in the railroad industry who lose their jobs.
Unemployment Compensation for Federal Employees
is the benefit program for unemployed federal employees. Funding comes
from the Federal Government and is distributed through State agencies.
Federal wages are not reported to a state unemployment compensation agency
until a claim is filed. The claimant?s federal wages will be assigned to
the state of the last duty or the state of residency if the duty station
was outside the United States, if covered work was dome in the state after
leaving federal service, or if employer was the Federal Emergency Management
Agency (FEMA). This is the only Federal agency that does not report wages
to the last duty station. Benefits amounts and length of weeks benefits
can be paid are determined by the law of the state in which the claim is
made. Federal wages assigned to another state may be transferred to the
resident state under the Combined Wage Claim program. When a claim is filed
following a period of federal employment, the claimant must bring all forms
the federal agency furnished upon departure. These include the SF-8 ?Notice
to Federal Employees About Unemployment Compensation? and the Notification
of Personnel Action. Also bring proof of the federal wages, if available.
Certain services for the federal government are not covered by unemployment
compensation. The agency worked for must certify that the services were
covered under the UCFE program. Information from a federal agency regarding
the location of the duty station, the wages, and whether the employment
was covered, are final and binding. If claimants disagree with any of this
information, they have the right to ask the agency to reconsider its findings
and appeal the denial of benefits.
Unemployment Compensation for Ex-Service
members is the benefit program for ex-military personnel to provide weekly
income to meet basic needs while searching for employment. Those who were
on active duty with a branch of the United States military may be entitled
to unemployment benefits based on that service. The military wages are
assigned to the state where they first file a new claim after the separation
from active duty. They must meet the following requirements: The claimants
must have been separated under honorable conditions. They must have completed
a full term of service, or if released early, it must have been for a qualifying
reason. And they served on active duty in reserve status as a member of
a National Guard or Reserve component continuously for 90 or more days.
Unemployment Compensation for Ex-Service benefits are paid under the same
conditions as benefits based on other employment. However, military wages,
for claims purposes, are determined by pay grade at time of separation.
A wage table furnished by the federal government which shows the equivalent
civilian wage for each military pay grade is used for the determination.
Information the military furnished about length of service and the reason
for separation is considered as final and binding. If any of this information
is incorrect on the Form DD-214, or other military documents, it is the
responsibility of the claimants to contact the service to have the information
reviewed by them or the Department of Veterans Affairs.
Workers? Compensation
Workers? compensation is meant to
protect employees from loss of income and to cover extra expenses associated
with job-related injuries or illness. Accidents in which the employee does
not lose time from work, accidents in which the employee loses time from
work, temporary partial disability, permanent partial or total disability,
death, occupational diseases, noncrippling physical impairments, such as
deafness, impairments suffered at employer-sanctioned events, such as social
events or during travel to organization business, and injuries or disabilities
attributable to an employer?s gross negligence are the types of injuries
and illnesses most frequently covered by workers? compensation laws. Since
1955, several states have allowed workers? compensation payments for job-related
cases of anxiety, depression, and certain mental disorders. Although some
form of workers? compensation is available in all 50 states, specific requirements,
payments, and procedures vary among states.
Certain features are common to virtually
all programs: The laws generally provide for replacement of lost income,
medical expense payments, rehabilitation of some sort, death benefits to
survivors, and lump-sum disability payments. The employee does not have
to sue the employer to get compensation. The compensation is normally paid
through an insurance program financed through premiums paid by employers.
Workers? compensation insurance premiums are based on the accident and
illness record of the organization. Having a large number of paid claims
results in higher premiums. Medical expenses are usually covered in full
under workers? compensation laws. It is a no-fault system; all job-related
injuries and illnesses are covered regardless of where the fault for the
disability is placed.
Workers? compensation coverage is
compulsory in all but a few states. In these states, it is elective for
the employer. When it is elective, any employers who reject the coverage
also give up certain legal protections. Benefits paid are generally provided
for four types of disability: permanent partial disability, permanent total
disability, temporary partial disability, and temporary total disability.
Before any workers? compensation is reorganized, the disability must be
shown to be work-related. This usually involves an evaluation of the claimant
by an occupational physician. One major criticism of workers? compensation
involves the extent of coverage provided by different states. The amounts
paid, ease of collecting, and the likelihood of collecting all vary significantly
from state to state.
After a decade of yearly double-digit
increases in the cost of workers? compensation, in the early 1990s at least
35 states began to make changes in their workers? compensation laws. These
changes included tighter eligibility standards, benefit cuts, improved
workplace safety, and campaigns against fraud. Recent data indicate that
these changes are paying off. The rates of increases in the cost of workers?
compensation have slowed considerably, and in 1993 the cost actually declined.
From 1993 through 1996, the cost of workers? compensation insurance continued
to decrease.
State and federal workers? compensation
insurance is based on the theory that the cost of industrial accidents
should be considered as one of the costs of production and should ultimately
be passed on to the consumer. Individual employees should neither be required
to stand the expense of their treatment or loss of income nor be required
to be subjected to complicated, delaying, and expensive legal procedures.
In most states, workers? compensation insurance is compulsory. Only in
New Jersey and Texas is it elective. When compulsory, every employer subject
to it is required to comply with the law?s provisions for the compensation
of work injuries. The law is compulsory for the employee also. When elective,
the employers have the option of either accepting or rejecting the law.
If they reject it, they lose the customary common law defenses ? assumed
risk of employment, negligence of a fellow servant, and contributory negligence.
Workers? compensation laws typically
provide that injured employees will be paid a disability benefit that is
usually based on a percentage of their wages. Each state also specifies
the length of the period of payment and usually indicates a maximum amount
that may be paid. In addition to the disability benefits, provision is
made for payment of medical and hospitalization expenses to some degree,
and in all states, death benefits are paid to survivors of the employee.
Commissions are established to adjudicate claims at little or no expense
to the claimant. Two methods of providing for workers? compensation risks
are commonly used. One method is for the state to operate an insurance
system that employers may join and are required to join. Another method
is for the states to permit employers to insure with private companies,
and in some states, employers may be certified by the commission handling
workers? compensation to handle their own risks without any type of insurance.