It wasn’t until I started working in Workforce Solutions that I truly began to understand the intricacies of how unemployment works. There are a lot of misunderstandings about the unemployment system, but the biggest one that we hear regularly is that employees pay unemployment taxes.

Remember the episode of Seinfeld where George applies for unemployment? The story is a tad overshadowed by MLB player Keith Hernandez’s appearance, but even so, Jerry’s show goes on about how employees pay for unemployment benefits.

It’s a common misconception, but there are only three states where employees contribute unemployment taxes: Alaska, New Jersey, and Pennsylvania. And even in these states, it’s pretty minimal!

What employees are likely thinking of is the FICA taxes taken out of their paychecks. But they are incorrect! FICA does not cover unemployment!

Employers cover unemployment by paying FUTA, a federal tax of 6 percent on the first $7,000 in annual income earned by every employee. Employers who pay on time get a tax break at 5.4 percent. As well, then employers cover unemployment by paying either through an unemployment tax rate as assigned by the state unemployment agency or via direct reimbursement of unemployment benefits if they are designated as a reimbursable (nonprofit) employer.

As the unemployment experts, CCC wants to educate everyone regarding all avenues of the UI process and make the system as accessible as possible. If you’re looking to brush up on your UI knowledge, check out CCC UI University or join us for one of our upcoming trainings.


Contact CCC to see how we can save your organization time and money.
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(800) 207-6926

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