Basic Facts and Myths about Unemployment Insurance

The Unemployment System is complex and often confusing to employers – even those who have been handling their own claims for years.  In order to have a better understanding of how this system works – it is first important to identify some of the truths of how unemployment works and also debunk some of the myths that circulate among employers.

Fact: In certain situations, employees that quit or were terminated can be found eligible for unemployment benefits – check your state unemployment laws to find out what those situations might be.

Myth: Only full employees are eligible to claim unemployment claims.  In many states, it does not matter how many hours an employee works because their eligibility is tied to the amount of earnings they received.

Fact: The unemployment system is governed by both state and federal unemployment laws.  This is why the ways your UI tax rate is calculated are different in each state and why the laws that determine claimant eligibility are different as well.

Myth: By acquiring other companies or through mergers, employers can lower their UI tax rate when needed.

Fact: This practice is referred to as State Unemployment Tax Act (SUTA) dumping and is against the law.  There are still financial penalties for this practice.

Myth: Employers are the only ones who pay for unemployment benefits to employees.  By and large this is true, however, there are a few states where employees also pay into the UI system (Alaska, New Jersey, and Pennsylvania).

These are a few of the many truths and misconceptions regarding the UI system that seem to confuse employers across the country.  Separating the truth from fiction is an important part of building an effective Unemployment Insurance Claims and Cost Management program.  To learn more about this or other topics, visit us on the web at www.UnemploymentTracker.com.