Unemployment Insurance

Definition: A federal program whereby eligible unemployed persons receive cash benefits for a specified period of time. These benefits are paid out of funds derived from employer, employee and government contributions.

Unemployment insurance helps workers who've been terminated by tiding them over financially for a limited time while they search for another job. For employers, unemployment insurance is primarily a paperwork headache. Tax rates for employers with good records of avoiding layoffs vary by state but are as low as a fraction of a percent of total payroll. For employers who have large numbers of former workers filing claims for unemployment insurance, however, unemployment taxes can be a significant financial burden. Here are three ways to minimize unemployment claim impact:

1. Understand the laws in your state. The agency that collects the tax can provide you with details of the regulations. Know what kinds of layoffs or terminations can trigger unemployment claims, and avoid them whenever possible.

2. Protest questionable unemployment insurance claims. Do not allow employees to file unjustifiable claims against you. It can take time and effort to contest questionable claims, but it is worth it in the long run. Your state unemployment benefits administration agency will let you know when someone has filed for benefits and ask for your input. Provide it.

3. Keep careful records of your tax payments and any charges against your unemployment insurance account by former employees. Errors have been known to be made. If one is made, protest it and document it. File your tax payments on time to bolster your position as a dutiful corporate citizen.

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