unemployment compensation business definition

Monetary payments from a joint federal-state program to workers who become unemployed through no fault of their own as determined by state law. Payments continue for a limited period or until the unemployed worker locates new employment. The program is designed to provide partial income replacement while unemployed workers search for new employment and to help stabilize the economy during economic downturns. Unemployment compensation is funded by an employer payroll tax that is based on wages paid to covered employees.