Overview: Unemployment insurance provides temporary financial assistance to workers who have lost their jobs through no fault of their own. Unemployment insurance is administered at the state level (in compliance with federal law), and each state establishes its own rules with respect to amounts, duration and eligibility for benefits.
The Federal Unemployment Tax Act (FUTA) requires employers to pay a federal tax of six percent of the first $7,000 paid to each employee. Most states also require employers to make additional contributions. Only a handful of states require employees to make contributions to unemployment insurance.
Eligibility for benefits varies by state, but in most states unemployed workers must:
Benefits are generally a percentage of earnings over the most recent 52 weeks up to a state maximum and are usually paid for up to 26 weeks. Additional benefits may be provided during periods of high unemployment.
Trends: While employees who quit their jobs generally are not entitled to receive unemployment benefits, some states make an exception for employees who quit due to domestic violence, including Arizona, Arkansas, California, Maryland, New Jersey, Texas, Washington and, beginning October 5, 2014, Minnesota.
Author: Tracy Morley, SPHR, Legal Editor
Updated to reflect developments regarding the ABC test for independent contractor status, effective January 16, 2020.
Updated to reflect increased state paid family leave contribution rates, effective January 1, 2020.
Updated to reflect the repeal of the AB or AC test of employment status, effective January 1, 2020.
Updated to reflect the repeal of the ABC test of employment status, effective January 1, 2020.
Updated to reflect the 2020 state taxable wage base amounts.
Updated to reflect amendments to definition of misconduct for unemployment benefits purposes, effective September 19, 2019.
Updated to reflect a decrease in the electronic filing threshold for quarterly reports, effective August 28, 2019.
XpertHR has made it easier to find key Employee Benefits resources by splitting the Employment Law Manual section formerly named Legally Required Benefits into two sections.
Enhanced to improve the comprehensiveness, organization and coverage of unemployment insurance topics. For social security and medicare content, see Social Security and Medicare: Federal.
HR guidance on laws governing unemployment insurance.