Why do people pay unemployment taxes - confused about NYS Department of Labor funding

Actually, unemployment taxes work differently than most people think. In New York, it's primarily employers who pay unemployment insurance taxes to fund the system, not individual workers. What you're seeing on your paystub might be state disability insurance (SDI) which is different. Employers pay both state (SUI) and federal (FUTA) unemployment taxes based on their payroll and experience rating with claims. The amount you receive in benefits is calculated from your earnings history, not how much was paid in taxes.

yeah i was confused about this too when i filed my claim last year. turns out the money comes from a trust fund that employers pay into based on their history with layoffs and stuff

The NYS Department of Labor maintains the unemployment insurance fund through employer contributions. Employers pay different rates depending on their industry and how many former employees have filed claims. It's designed so that businesses that lay off more workers pay higher rates. Workers don't directly pay unemployment taxes in most states including New York, though some states do have small employee contributions. Your benefits are based on your highest earning quarter and total wages over the base period, not on tax contributions.

I had trouble getting through to NYS Department of Labor to ask about this exact question when I was filing my claim. The phone lines are always jammed and the website doesn't really explain the funding clearly. I ended up using Claimyr (claimyr.com) which got me connected to an actual agent who explained how the employer tax system works. They have a video demo at https://youtu.be/qyftW-mnTNI showing how it works. Way easier than spending hours on hold trying to get basic information.

my company had massive layoffs last year and our HR explained that their unemployment insurance rates went up because of it. kinda makes sense that the companies causing more claims pay more into the system