Unemployment Compensation

Posted in Human Resources Terms, Total Reads: 783

Definition: Unemployment Compensation

Unemployment Compensation, also referred to as unemployment benefit or unemployment insurance, depending upon the jurisdiction under which it falls. It is the amount which is received under the umbrella of unemployment compensation law of USA or for that matter any state. It mainly covers any state sponsored insurance benefits which the employee will get as a part of his unemployment fund.

It mainly includes the railroad unemployment benefit and not the worker’s compensation. For the workers who have lost their jobs due to any reason it serves as a backup by providing them monetary help for the time period till which they get some suitable job and are able to earn some money. It is justified by sustaining the money that the customers spend during the period of economic adjustments. It’s a kind of social welfare scheme/act/payment from state or any other authorized body to unemployed people. Depending on the state’s or the organization’s jurisdiction the payment amount may vary (small maybe just covering the basic needs, or compensation for the long term salary discrepancy). The term unemployment benefits only holds good for registered employees. “Ghent System”, wherein the significant amount of employee benefits is distributed through the trade and labor unions.


The first such kind of initiative was taken up by UK’s National Insurance Act, 1911, though the move was political but it benefitted the working class as well as daily wage earners equally. The concept behind this is quite mathematical based on the actuarial principles and included contributions from employees, employers and the taxpayers. At that time this concept was implemented by only a few companies.

Example: A person has been laid off from his job and has already used the benefits, since he’s in a high need of some help his organization gives him an additional 13 weeks so that the total benefit amounts to 39 weeks. According to the unemployment compensation benefit plan an employee in further need will have a total of 52 weeks of unemployment insurance payments.


Hence, this concludes the definition of Unemployment Compensation along with its overview.


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