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Unemployment benefits are payments made by the state or other authorized bodies to unemployed people. Benefits may be based on a compulsory para-governmental insurance system. Depending on the jurisdiction and the status of the person, those sums may be small, covering only basic needs (thus a form of basic welfare), or may compensate the lost time proportionally to the previous earned salary. They often are part of a larger social security scheme.
Unemployment benefits are generally given only to those registering as unemployed, and often on conditions ensuring that they seek work and do not currently have a job.
In some countries, a significant proportion of unemployment benefits are distributed by trade/labor unions, an arrangement known as the Ghent system.
Unemployment compensation is money received from the United States and a state by a worker who has become unemployed through no fault of their own. In the United States, this compensation is classified as a type of social welfare benefit. According to the Internal Revenue Code, these types of benefits are to be included in a taxpayer's gross income.
The idea of unemployment insurance in the United States originated in Wisconsin in 1932. In the United States, there are 50 state unemployment insurance programs plus one each in the District of Columbia, Puerto Rico and United States Virgin Islands. Through the Social Security Act of 1935, the federal government of the United States effectively encouraged the individual states to adopt unemployment insurance plans.
Unemployment insurance is a federal-state program jointly financed through federal and state employer payroll taxes (federal and state UI 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 at least one employee during any day of a week during 20 weeks in a calendar year, regardless of whether the weeks were consecutive. However, some state laws differ from the federal law.
To facilitate this program, the U.S. Congress passed the Federal Unemployment Tax Act (FUTA), which authorizes the Internal Revenue Service (IRS) to collect an annual federal employer tax used to fund state workforce agencies. FUTA 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 unemployment benefits (during periods of high unemployment) and provides for a fund from which states may borrow, if necessary, to pay benefits. As originally established, the states paid the federal government.
The FUTA tax rate was originally three percent of taxable wages collected from employers who employed at least four employees, and employers could deduct up to 90 percent of the amount due if they paid taxes to a state to support a system of unemployment insurance which met Federal standards, but the rules have changed as follows. The FUTA tax rate is now, effective after June 30, 2011, 6.0 percent of taxable wages of employees who meet both the above and following criteria, and 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 receive an offset credit of up to 5.4 percent regardless of the rate of tax they pay their state. Therefore, the net FUTA tax rate is generally 0.6 percent (6.0 percent - 5.4 percent), for a maximum FUTA tax of $42.00 per employee, per year (.008 X $7,000 = $56.00). State law determines individual state unemployment insurance tax rates. In the United States, unemployment insurance tax rates use experience rating.
Within the above constraints, the individual states and territories raise their own contributions and run their own programs. The federal government sets broad guidelines for coverage and eligibility, but states vary in how they determine benefits and eligibility.
http://en.wikipedia.org/wiki/Unemployment_insurance
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