How HR Teams Can Effectively Manage Unemployment Claims: Unemployment 101

What Is Unemployment?

“Unemployment was originally designed post-Depression by the federal government to provide some financial support to individuals between periods of employment,” explains Turner “As you'd expect, the idea was to get some much-needed funds into the hands of people who are not working to help bolster the economy.”

“There are requirements, regulations, and guidelines from the federal government regarding the administration of the unemployment program, but each state's unemployment agency is free to define the different aspects of their program, such as benefit amounts, eligibility requirements, and the funding parameters to their liking,” Turner adds. Each state has its own unemployment program, along with the District of Columbia, Puerto Rico, and the Virgin Islands.

What's the Purpose of Unemployment?

As Turner mentioned, the unemployment system was originally designed to provide temporary financial assistance to individuals who are unemployed through no fault of their own.

“Originally that meant individuals who were laid off, but the definitions have been reinterpreted and redefined over the years to include some individuals who may have been discharged for reasons other than a lack of work and even some folks who have voluntarily resigned their position,” Turner explains. 

Turner adds that each state sets the specific eligibility criteria, weekly benefit amounts, duration of benefits, and how the separation issues are adjudicated. However, there are some general parameters that are set by the feds.

How Is Unemployment Determined

Outside of extraordinary events such as the COVID-19 pandemic, unemployment benefits that are paid to claimants are sourced exclusively from state unemployment trust funds. “There are misconceptions throughout the country that these benefits are generated from employees’ tax dollars and thus are some type of savings account that they have available when these issues arise,” says Kendall, “But that couldn’t be further from the truth.”

Kendall explains that these state unemployment trust funds, which fund the state’s individual program, are sustained solely through contributions made by employers in the form of quarterly tax payments. 

While the former employees or claimants would be the ones reaping these benefits when they are temporarily unemployed, through no fault of their own, it's actually employers who keep this system running through their tax dollars in payments.

Now that you understand unemployment basics, like what it is and how it’s determined, we’ll focus on who is and isn’t eligible for unemployment benefits in our next blog post. 

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