The Federal-State Unemployment Compensation Program (UC Program) originated in 1935 with the passing of the Social Security Act. The UC Program was designed to assist people who’ve been recently separated from their jobs and to help strengthen the economy during times of recession.
Through the passing of the Federal Unemployment Tax Act of 1939, employees pay a 6.2 percent tax rate on the first $7,000 earned during each year of employment, according to the Almanac of Policy Issues. Employers also pay a certain percentage in taxes to help fund the UC Program.
Eligibility requirements for receiving unemployment compensation may vary from state to state, though certain basic requirements are common in most states. Employees must have worked at least a year for an employer before eligibility kicks in. Job loss must occur as a result of an involuntary separation, such as a layoff and not because of employee misconduct or her decision to leave a job. Eligible recipients must register at their local unemployment office and demonstrate an ongoing willingness to seek out other employment and accept suitable job offers. Suitable job offers include work that does not pose an undue risk to a person’s safety, is a reasonable distance from a person’s residence and the degree of similarity between a person’s former occupation and any existing job offer. Typically, the longer a person is out of work, the more likely a particular job offer will be considered suitable work.
Benefit amounts for unemployment compensation vary depending how much a person made and the set minimum and maximum benefit amounts for each state. Ultimately, unemployment benefits replace a portion, or fraction, of a person’s former income. These portions are based on weekly earning amounts within one or more quarters per year. On average, benefit amounts allotted per state equal approximately 50 percent of a person’s past income earnings, according to the Social Security Administration site. Calculations are based on weeks that reflect the highest wage earnings, which are the ones most likely to result from full-time work.
States that experience prolonged periods of unemployment may opt to provide unemployed persons with extended compensation benefits provided they meet certain criteria. Extended benefits become available once a person exhausts their regular state benefit entitlement. According to the Social Security Administration, states with average unemployment rates of at least 5 percent that last 13 weeks or longer may offer extended benefits in cases where unemployment rates exceed the rates within the previous two years by 20 percent. States with unemployment rates of 6 percent or higher can disregard the two-year, 20-percent requirement. Eligible recipients must have worked on a full-time basis for a minimum of 20 weeks in order to qualify for extended benefits.