Unemployment benefits are not welfare

[ksen]

Do elaborate...

In some states the employer pays it. In some the employee pays it.

which ones mske the employees pay?

 

[Loren Pechtel]

In some states the employer pays it. In some the employee pays it.

which ones mske the employees pay?

I don't recall and Google isn't making it easy.

 

[ksen]

it's because there aren't any

 

[Bronzeage]

Actually, the premiums are paid by the employer.

You can argue that in the absence of unemployment insurance the invisible hand of the market would force the employer to spend an equivalent amount on wages. I'm both an employer and an employee and I've never found that argument convincing - the first place reduced expenses go is into the employer's profits, in my experience.

The employer handles the payments, but the actual amount is a percentage of the payroll. The more an employee is paid, the greater the contribution. It's not based on profits or revenues.

Many years ago, an insurance agent came to my workplace, trying to sell supplemental health insurance policies. Each employee was given a neat little folder which contained a list of all their compensation, including benefits. This included something like $20 a month for use of the break room. I don't know how they arrived at that amount, but my parking space was worth about the same. It also included the contributions made to FUTA, up to that pay period.

It was quite some time before I got any of that FUTA money back, but when the General Manager was caught looting the company with the intention of buying out the owners with stolen money, it was too late to save the operation. Myself and most of the other managers were out of work. I don't know the actual figures, but I don't think I used up 22 years of contributions in six months.

 

[SimpleDon]

My Accounting Coach, Harold Averkamp, tells me,

Federal unemployment tax

FUTA (Federal Unemployment Tax Act) tax is a payroll or employment tax paid solely by the employer. While the FUTA tax is paid by the employer, it is based on each employee's wages or salary. Generally, the FUTA tax ends up being 0.6% of the first $7,000 per year of each employee's wages or salary. That means the employer's maximum cost for FUTA per year per employee is $42 ($7,000 x 0.006). If an employee earns only $5,000 during a calendar year, the employer's cost is $30 ($5,000 x 0.006).

Under double-entry accounting, the FUTA tax will result in 1) a liability, and 2) a cost that is immediately expensed or assigned as a product cost. (The cost of the FUTA tax on employees involved in manufacturing activities will be assigned to products. The cost of the FUTA tax on employees in the selling and administrative activities should be expensed with their salaries and wages as selling and administrative expense.)

State unemployment tax

State governments administer unemployment services and determine the state unemployment tax rate for each employer. (Some not-for-profit organizations—such as churches without schools—may not be required to pay state unemployment taxes. You should check with your state unemployment office to learn the specifics for your organization.)

Generally, states require that the employers pay the entire unemployment tax. Often, employers that have built up a large reserve in the state's unemployment fund will have lower unemployment tax rates. Employers with a small reserve (or no reserve at all) will have higher unemployment tax rates.

The state unemployment tax rate is applied to a wage base that is determined by each state. (The wage bases range from $7,000 to more than $30,000.) If a state's unemployment wage base is $14,000 then the state unemployment tax rate is applied only to the first $14,000 of each employee's annual salary and wages. If we also assume that an employer's state unemployment tax rate is 4%, then the employer's state unemployment tax cost will be a maximum of $560 per year for each employee ($14,000 x 4%).

To illustrate, let's assume that a company has three employees. In 2014, Employee #1 earns $19,000, Employee #2 earns $40,000, and Employee #3 earns $4,000. If the 2014 state unemployment tax rate is 4% and the wage base is $14,000, the employer will pay a tax of $1,280 to the state government:

Even though the state unemployment tax is based on employee salaries and wages, the entire tax is paid by the employer. There is no withholding from an employee's salary or wages for the state unemployment tax.

Worker compensation insurance

Worker compensation insurance provides coverage for employees who are injured on the job. State law usually requires that employers carry this insurance. Worker compensation insurance rates are a function of at least three variables: (1) the type of business or industry, (2) the type of job being performed, and (3) the employer's history of claims.

For example, statistics show that a production worker in a meat packing plant has a greater-than-average chance of suffering job-related cuts or back injuries. Because of this, worker compensation insurance rates for these employees can be as high as 15% of wages. On the other hand, the office staff of the meat packing plant—provided that they do not venture out into the production area—may have a rate that is less than 1% of salaries and wages.

The worker compensation insurance rates are then applied to the wages and salaries of the employees to arrive at the worker compensation insurance premiums or costs. Although the insurance premiums are based on employee salaries and wages, the entire premium cost is likely to be paid by the employer and is considered an expense for the employer. (Contact your state's worker compensation office for the specifics in your state.)

If the employer pays the premium in advance, a current asset such as Prepaid Insurance is used. The account balance will be reduced and Worker Compensation Insurance Expense will increase as the employees work.

If the employer does not pay the premiums in advance, the company must accrue the expense with an adjusting entry that increases Worker Compensation Insurance Expense along with increases in a current liability such as Worker Compensation Insurance Liability. In this situation the current liability will be reduced when the employer pays the worker compensation insurance premiums.

Worker compensation insurance is a significant expense for the employer and therefore we consider it an important part of payroll accounting.

Harold is here.

The internet, TMI at your fingertips.

 

[Playball40]

LOL, not if he doesn't reduce his rentable square feet. Interesting tidbit. If you are an employee of the landlord, all your pay, benefits, taxes etc...are paid/reimbursed by the tenants of the building.

Are you referring to triple-net leases, or to the economics of the business in general?

(We could always tell the employer that he isn't paying the unemployment taxes, his customers are....)

Both. NNN leases are just one method (most retail and flex space is pure NNN). Office leases typically utilize a base year, but ultimately, all expenses (and then some) are paid by the tenants.

 

[Playball40]

Actually, the premiums are paid by the employer.

You can argue that in the absence of unemployment insurance the invisible hand of the market would force the employer to spend an equivalent amount on wages. I'm both an employer and an employee and I've never found that argument convincing - the first place reduced expenses go is into the employer's profits, in my experience.

The employer handles the payments, but the actual amount is a percentage of the payroll. The more an employee is paid, the greater the contribution. It's not based on profits or revenues.

Many years ago, an insurance agent came to my workplace, trying to sell supplemental health insurance policies. Each employee was given a neat little folder which contained a list of all their compensation, including benefits. This included something like $20 a month for use of the break room. I don't know how they arrived at that amount, but my parking space was worth about the same. It also included the contributions made to FUTA, up to that pay period.

It was quite some time before I got any of that FUTA money back, but when the General Manager was caught looting the company with the intention of buying out the owners with stolen money, it was too late to save the operation. Myself and most of the other managers were out of work. I don't know the actual figures, but I don't think I used up 22 years of contributions in six months.

Actually, it is paid (in FL) on the first $7,000 of wages, so no, the more you make the more you pay is not accurate.

 

[Bronzeage]

The employer handles the payments, but the actual amount is a percentage of the payroll. The more an employee is paid, the greater the contribution. It's not based on profits or revenues.

Many years ago, an insurance agent came to my workplace, trying to sell supplemental health insurance policies. Each employee was given a neat little folder which contained a list of all their compensation, including benefits. This included something like $20 a month for use of the break room. I don't know how they arrived at that amount, but my parking space was worth about the same. It also included the contributions made to FUTA, up to that pay period.

It was quite some time before I got any of that FUTA money back, but when the General Manager was caught looting the company with the intention of buying out the owners with stolen money, it was too late to save the operation. Myself and most of the other managers were out of work. I don't know the actual figures, but I don't think I used up 22 years of contributions in six months.

Actually, it is paid (in FL) on the first $7,000 of wages, so no, the more you make the more you pay is not accurate.

I stand corrected, but my point still stands. The contributions made by the employer are earned by the employer. The employer is only the agent of payment. Unemployment benefits are paid from an account funded by workers, not employers.

 

[Playball40]

Actually, it is paid (in FL) on the first $7,000 of wages, so no, the more you make the more you pay is not accurate.

I stand corrected, but my point still stands. The contributions made by the employer are earned by the employer. The employer is only the agent of payment. Unemployment benefits are paid from an account funded by workers, not employers.

That's not right though. The employer pays the tax into an insurance fund based on the wages of the employee. IT IS NOT WITHHELD from the employee nor does the employee pay in (the only requirement is the employee has wages). Unemployment is then paid out from this fund (not the employer). It is an EMPLOYER expense that is for the benefit and protection of the employee.

 

[Bronzeage]

I stand corrected, but my point still stands. The contributions made by the employer are earned by the employer. The employer is only the agent of payment. Unemployment benefits are paid from an account funded by workers, not employers.

That's not right though. The employer pays the tax into an insurance fund based on the wages of the employee. IT IS NOT WITHHELD from the employee nor does the employee pay in (the only requirement is the employee has wages). Unemployment is then paid out from this fund (not the employer). It is an EMPLOYER expense that is for the benefit and protection of the employee.

I meant to write "earned by the employee,"

All of my compensation, cash and benefits, is an employer expense. If he expects me to work, this is what it costs. When I show up in the morning, I am a cost. This includes the FUTA contributions. If I don't show up, there is no FUTA contribution.

 

[jonatha]

Actually, the premiums are paid by the employer.

You can argue that in the absence of unemployment insurance the invisible hand of the market would force the employer to spend an equivalent amount on wages. I'm both an employer and an employee and I've never found that argument convincing - the first place reduced expenses go is into the employer's profits, in my experience.

The employer handles the payments, but the actual amount is a percentage of the payroll. The more an employee is paid, the greater the contribution. It's not based on profits or revenues.

Many years ago, an insurance agent came to my workplace, trying to sell supplemental health insurance policies. Each employee was given a neat little folder which contained a list of all their compensation, including benefits. This included something like $20 a month for use of the break room. I don't know how they arrived at that amount, but my parking space was worth about the same. It also included the contributions made to FUTA, up to that pay period.

It was quite some time before I got any of that FUTA money back, but when the General Manager was caught looting the company with the intention of buying out the owners with stolen money, it was too late to save the operation. Myself and most of the other managers were out of work. I don't know the actual figures, but I don't think I used up 22 years of contributions in six months.

The actual amount is a percentage of each employee's wages up to a ceiling, but the ceiling is so low ($7000 for FUTA; Kentucky's ceiling is higher but is scheduled to grow only to $12000 by 2022 or thereabouts) that for all practical purposes it can be treated as a fixed poll tax.

 

[Clivedurdle]

Hang on a second, is the idea of insurance an attack on the free market?