Unemployment Compensation

AAA

DEFINITION of 'Unemployment Compensation'

Funds paid by the state to unemployed workers who have lost their jobs due to layoffs or retrenchment. Unemployment compensation is meant to provide a source of income for jobless workers until they can find employment. In order to be eligible for it, certain criteria must be satisfied by an unemployed worker, such as having worked for a minimum stipulated period and actively looking for employment. Unemployment compensation provides partial income replacement only for a defined length of time or until the worker finds employment, whichever comes first.


Also known as unemployment insurance or unemployment benefits.

INVESTOPEDIA EXPLAINS 'Unemployment Compensation'

Unemployment compensation is paid by many developed nations and some developing economies. In the United States, unemployment compensation was ushered in by the Social Security Act of 1935, when the economy was struggling through the Depression. The U.S. unemployment compensation system is jointly managed by the federal and state governments and financed through payroll taxes on employers in most states. In Canada, the system is called Employment Insurance and is funded by premiums paid by both employers and employees.

RELATED TERMS
  1. Unemployment Insurance

    A source of income for workers who have lost their jobs through ...
  2. Unemployment Income

    An insurance benefit that is paid as a result of a taxpayer's ...
  3. Natural Unemployment

    The lowest rate of unemployment that an economy can sustain over ...
  4. Unemployment Rate

    The percentage of the total labor force that is unemployed but ...
  5. Discouraged Worker

    A person who is eligible for employment and is able to work, ...
  6. Poison Put

    A takeover defense strategy in which the target company issues ...
RELATED FAQS
  1. What are the key points when getting ready to file for unemployment aid?

    Before filing for unemployment compensation, there are several key points that you must get right in order for your claim ... Read Full Answer >>
  2. What are the major categories of financial institutions and what are their primary ...

    In today's financial services marketplace, a financial institution exists to provide a wide variety of deposit, lending and ... Read Full Answer >>
  3. What is the key difference between the participation rate and the unemployment rate?

    The participation rate and unemployment rate are economic metrics used to gauge the health of the U.S. job market. The key ... Read Full Answer >>
  4. How do modern companies assess business risk?

    Before a business can assess or mitigate business risk, it must first identify probable or likely risks to its bottom line. ... Read Full Answer >>
  5. Why has emphasis on corporate governance grown in the 21st century?

    Corporate governance refers to operational practices, management protocols, and other governing rules or principles by which ... Read Full Answer >>
  6. How can I invest in a mutually owned insurance company?

    Mutually owned insurance companies do not issue stock or other equity securities. This means you cannot become a shareholder, ... Read Full Answer >>
Related Articles
  1. Economics

    The Economics Of Labor Mobility

    Loosening labor restrictions has both good and bad effects for a country and its workers.
  2. Economics

    Examining The Phillips Curve

    This model depicts an inverse relationship between unemployment and wage inflation, but is it accurate?
  3. Fundamental Analysis

    The Misery Index: Measuring Your Misfortune

    The Misery Index measures a combination of unemployment and inflation, but what does it mean for your finances?
  4. Retirement

    How Unemployment Affects You (Even If You're Working)

    Rebounding from a stint of unemployment can be a frustrating thing to do. These tips should soften the blow.
  5. Budgeting

    Planning For Unemployment

    Preparation can help you land on your feet after getting the "old heave-ho".
  6. Budgeting

    Layoffs: Know The WARNing Signs

    Layoff rumors can run rampant, but if your company is required to give you two months' notice, you can plan for unemployment.
  7. Insurance

    Do You Need Kidnap & Ransom Insurance?

    Americans working abroad – and high-profile individuals traveling frequently in kidnapping hot spots – should consider this type of protection.
  8. Insurance

    A Guide To Kidnap & Ransom Insurance

    Every year, thousands of people are kidnapped for ransom all over the world. This insurance offers protection – and peace of mind.
  9. Investing Basics

    Explaining Tender Offers

    A tender offer is a broad public offer made by a person or company to purchase all or a portion of the shares of a publicly traded company.
  10. Insurance

    Should I Insure My Wedding Ring?

    It depends, in part, on the ring's value and your current insurance coverage. Here's a guide to making a decision that's right for you.

You May Also Like

Hot Definitions
  1. National Currency

    The currency or legal tender issued by a nation's central bank or monetary authority. The national currency of a nation is ...
  2. Treasury Yield

    The return on investment, expressed as a percentage, on the debt obligations of the U.S. government. Treasuries are considered ...
  3. Bund

    A bond issued by Germany's federal government, or the German word for "bond." Bunds are the German equivalent of U.S. Treasury ...
  4. European Central Bank - ECB

    The central bank responsible for the monetary system of the European Union (EU) and the euro currency. The bank was formed ...
  5. Quantitative Easing

    An unconventional monetary policy in which a central bank purchases private sector financial assets in order to lower interest ...
  6. Current Account Deficit

    A measurement of a country’s trade in which the value of goods and services it imports exceeds the value of goods and services ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!