Unemployment tax can be one of the most daunting taxes for many small businesses. Information is scant and it can seem you are at the mercy of the Unemployment Insurance Office in your state to know your rates and when you need to pay, not to mention understanding different regulations and laws. It’s many hoops to jump through but this article will help some light on this mysterious topic.
Unemployment insurance is a joint federal and state program to provide financial assistance for the unemployed. UI was created in the US in the Great Depression to get money into the hands of the unemployed so they could start spending money once again. People unemployed through no fault of their own are able to receive weekly cash benefits for a set period of time while actively looking for a job. It generally covers those who are laid off, but not those who quit.
Unemployment Insurance paid for by a two-part tax at the federal and state level. Generally, it is a tax paid by the employer, but some states have small employee contribution rates. There is a byzantine structure of tax rates that can be difficult to understand.
Benefits for Employees
The benefit for employees is readily apparent. By having a small weekly stipend to cover expenses while looking for a job, the financial shock of a layoff or other job loss is reduced. Employees can continue paying rent or car payments while searching for a new job. This provides not only microeconomic stability but macroeconomic stability as well.