Unemployment Compensation

What Does Unemployment Compensation Mean?

Unemployment compensation, a type of government insurance program, provides temporary financial assistance to individuals who have lost their jobs due to layoffs or entrenchment and meet specific state eligibility requirements. Typically, applicants must have worked for a certain period and actively seek employment to qualify for partial income replacement. The amount and duration of payments vary by jurisdiction, continuing either for a set period or until the individual secures new employment, whichever comes first.

Unemployment compensation is also referred to as unemployment insurance or unemployment benefits.

Insuranceopedia Explains Unemployment Compensation

Unemployment compensation, established by the Social Security Act of 1935, was introduced to support the country’s economic recovery during the mass unemployment of the Great Depression. As many states were initially resistant to offering such benefits, federal legislation was necessary. Since its inception, the program has been jointly managed by federal and state governments. In most jurisdictions, it is funded through payroll taxes on employers. Today, many developed and some developing nations provide some form of unemployment compensation.