Unemployment Compensation

Updated: 09 June 2023

What Does Unemployment Compensation Mean?

Unemployment compensation, a type of governmental insurance program, refers to temporary financial assistance provided to people who have lost their job due to entrenchment or layoffs and who meet other state eligibility requirements. Depending on the state, those who apply for these benefits generally need to have worked for a certain period of time and must actively seek work during their unemployment to receive partial income replacement, with the specific amount varying across jurisdictions. Payments continue for a stipulated period or until the unemployed worker finds a job, whichever occurs first.

Unemployment compensation is also known as unemployment insurance or unemployment benefits.

Insuranceopedia Explains Unemployment Compensation

Established by the Social Security Act of 1935, unemployment compensation was mandated to help country's economic recovery in light of the mass unemployment of the Great Depression. As states were resistant to providing such benefits, legislation at the federal level was required. Since then, federal and state governments jointly manage this insurance program. In most jurisdictions, payroll taxes on employers finance it. Many developed and some developing nations offer some form of unemployment compensation as well.


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