BIES - Unemployment Insurance Lesson

Unemployment Insurance

Unemployment Insurance is somewhat misnamed. While it does provide compensation for individuals who are unemployed through no fault of their own, the funds actually come from a tax paid by employers.

A Brief History

Unemployment Insurance Programs provide benefits for workers who involuntarily become unemployed and who are willing to accept suitable employment. Through the cooperation of the federal government and the states, unemployment insurance programs provide benefits for workers who involuntarily become unemployed and who are willing and able to accept suitable employment. All fifty states and the District of Columbia participate in the unemployment compensation program. The Federal Social Security Act of 1935 offered states an offset incentive to participate in the program. A uniform federal tax was imposed on all employers in the nation. In those states that had an unemployment tax, employers were allowed to deduct a credit of up to 90% of the federal tax for the amount of state tax paid. The Social Security Act also allowed states to receive grants for the administration of unemployment programs.

If employers are to receive an offset against federal taxes and if states are to receive federal grants for administration, federal law requires state unemployment insurance programs to meet certain requirements. These requirements are intended to ensure that a state participating in the program has an unemployment insurance system that is fairly administered. The state itself decides the amount and duration of benefits (except for certain federal requirements concerning federal-state Extended Benefits); the contribution rates (with limitations); and, in general, the eligibility requirements and disqualification provisions. The states also directly administer the programs by collecting contributions, maintaining wage records (where applicable), taking claims, determining eligibility, and paying benefits to unemployed workers.

The Employer's Role

Under the Federal Unemployment Tax Act (FUTA) Links to an external site., private employers in industry and commerce are subject to the law if they have one or more individuals employed on 1 day in each of 20 weeks during the current or preceding year or if they paid wages of $1,500 or more during any calendar quarter in the current or preceding year.

All FUTA Links to an external site. tax, as well as the State Unemployment Tax (SUTA), is paid by the employer, not the employee. The FUTA rate is 6% of the first $7,000 of an employee's salary for a year. Once the federal tax has been paid on the first $7,000, no other tax is paid for that employee for that year. Employers who pay their state unemployment taxes on time are given a substantial credit against the total FUTA tax owed. FUTA taxes can thus be reduced from 6% to 0.6% when this condition is met. The tax base for the State of Georgia Links to an external site., however, is $9,500 and employers must pay the state that amount per employee each year. Please keep in mind that rates and taxable income requirements are subject to legislative changes. Information provided in this module reflects 2022 numbers. 

The Employee's Role

The funding for unemployment insurance benefits comes from taxes paid by employers. Workers do not pay any costs. Eligibility for benefits is determined based on past wages, the reason for job separation, and availability and job search requirements. Claims are effective on the date they are filed and are not retroactive to the last day worked. Unemployment claims can be filed in person at any Georgia Department of Labor (GDOL) career center or by Internet from any computer with appropriate Internet access.

You must be unemployed or partially unemployed through no fault of your own to receive benefits. Information will be obtained from your employer regarding your separation. Examples of potentially qualifying reasons are:

  • You were laid off due to a lack of work.
  • You are still working but the employer reduced your hours due to a lack of work.
  • You were fired without work-related misconduct.
  • You quit your job for a good work-related reason.

Georgia law requires all applicants applying for unemployment benefits who are18 years of age or older sign an affidavit attesting they are (1) a United States citizen or a legal permanent resident or (2) a non-citizen legally present in the United States. You cannot receive benefits until the affidavit has been completed.

Self-Assessment

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