Unemployment Compensation


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.

BREAKING DOWN '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.

  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. Discouraged Worker

    A person who is eligible for employment and is able to work, ...
  5. Unemployment Rate

    The percentage of the total labor force that is unemployed but ...
  6. Employee Stock Option - ESO

    A stock option granted to specified employees of a company. ESOs ...
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. Professionals

    4 Ways Companies Can Relieve Workplace Stress

    Workplace stress can cost companies tons of money in lost productivity and absenteeism. Some of that is out of their control, but often they are the cause.
  8. Insurance

    Explaining Indemnity Insurance

    Indemnity insurance is an insurance policy that protects business owners and employees from losses due to failure to deliver expected services.
  9. Professionals

    Prevent Employees From Hacking You Computer System

    Cyber security attacks from a current or ex-employee can cause a lot of pain. Here is how to avoid such attacks.
  10. Entrepreneurship

    Hire Your Kids at Your Small Business – Here's Why

    And how to make sure you do it the right way, following IRS guidelines.
  1. How does comprehensive income get reported on my 1040?

    As of 2015, on the standard IRS Form 1040, your comprehensive or total income is calculated through lines 7-22. This is different ... Read Full Answer >>
  2. 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 >>
  3. What are the best free online calculators for calculating my taxable income?

    Free online calculators for determining your taxable income are located at Bankrate.com, TaxACT.com and Moneychimp.com. Determining ... Read Full Answer >>
  4. What economic indicators are important to consider when investing in the retail sector?

    The unemployment rate and Consumer Confidence Index (CCI) rank as two of the most important economic indicators to consider ... Read Full Answer >>
  5. What protections are in place for a whistleblower?

    Whistleblowers can play a critical role in ensuring the compliance, safety, honesty and legal fairness of governments and ... Read Full Answer >>
  6. Can I buy insurance to reduce unlimited liability in a partnership?

    Partnership insurance is actually quite common. Most of the time, partners buy insurance to safeguard against the possibility ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Zero-Sum Game

    A situation in which one person’s gain is equivalent to another’s loss, so that the net change in wealth or benefit is zero. ...
  2. Capitalization Rate

    The rate of return on a real estate investment property based on the income that the property is expected to generate.
  3. Gross Profit

    A company's total revenue (equivalent to total sales) minus the cost of goods sold. Gross profit is the profit a company ...
  4. Revenue

    The amount of money that a company actually receives during a specific period, including discounts and deductions for returned ...
  5. Normal Profit

    An economic condition occurring when the difference between a firm’s total revenue and total cost is equal to zero.
  6. Operating Cost

    Expenses associated with the maintenance and administration of a business on a day-to-day basis.
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!