Who Pays for Unemployment Insurance Benefits

Taxes fund many US government programs. One of the many things that taxes fund is the Unemployment Insurance Benefits Program. Taxes paid by employers mainly fund the US Unemployment Insurance Program. Specifically, these employers pay the government 6 percent of $7,000 in yearly income from every employee. When employers pay their taxes on time, they get a tax break of 5.4%. Taxes vary from state to state, however. For example, a state can choose to collect the first $8,000 from employers instead of $7,000. Instead of common belief, most employees are very rarely required to pay unemployment insurance, making it usually fall onto the employers to pay into unemployment insurance.

How Are Unemployment Insurance Benefits

Like many other insurance programs, unemployment insurance rates are different for employers based on their history paying their taxes for the program. For example, if an employer has many employees claiming unemployment insurance, they would have a higher tax rate to pay to the government. In order to avoid having to pay higher tax rates, employers place an emphasis on human resources and avoiding to lay off employees.

How is Unemployment Tax Money

After this tax money is collected, it is placed into three different areas which include:

  • Extended benefits program
  • State programs
  • The loan fund

The Department of Labor is in charge of overseeing all of the funds, along with distributing them across the United States to different states. When there are emergencies and the benefits program is needed more, the benefits program can be changed by using additional funds.