Unemployment Insurance
State-mandated coverage for employees who lose their jobs.
Unemployment insurance (UI) is a joint federal-state program funded by employer payroll taxes (FUTA and state unemployment taxes). It provides temporary income to workers who lose their jobs through no fault of their own. Each state sets its own benefit amounts and duration (typically 12–26 weeks). Employer tax rates vary based on company size, industry, and claims history.
Example
After laying off two employees, a business sees its state unemployment tax rate increase from 2.7% to 4.5% the following year due to the claims experience.
Why It Matters for Your Business
Your unemployment tax rate is directly affected by layoffs and terminations, so careful hiring and documentation practices can keep rates (and costs) low.
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