Where does unemployment money come from - Washington ESD funding sources explained

Thank you! So it's not coming from income taxes or anything like that?

Correct. It's completely separate from general tax revenue. The UI system is essentially an insurance program funded by employers.

In Washington state, only employers pay unemployment insurance taxes. Some states have employee contributions but Washington doesn't. What you might be seeing is State Disability Insurance (SDI) or other deductions.

oh ok that makes sense, probably was thinking of disability insurance then

That actually makes a lot of sense. So companies that have more layoffs pay more into the system?

Exactly. It creates an incentive for employers to maintain stable workforces since their unemployment tax rate goes up if they have frequent layoffs or terminations that result in UI claims.

Wow I had no idea the rates were different for different companies. Learn something new every day!

Is this legitimate? I'm always skeptical of services that charge to help with government stuff.

I was skeptical too but it actually worked. They don't ask for any personal info upfront and I was able to get my adjudication issues resolved after weeks of trying on my own.

Anything that helps get through to Washington ESD is worth looking into. Their phone system is absolutely terrible.

That's exactly right. It's unemployment INSURANCE, not welfare. You earned eligibility through your work history and your employer paid premiums into the system.

People who complain about unemployment benefits usually don't understand how the system works. It's literally insurance for job loss.

Yeah their website is terrible. I've been trying to find clear information about job search requirements and it's all buried in different sections.

The whole Washington ESD system needs an overhaul. The technology is stuck in the 1990s.

So the extended benefits during COVID were different from regular unemployment?

Yes, programs like PUA and PEUC were federally funded emergency programs. Regular state UI benefits have always been employer-funded through state unemployment taxes.

Thanks, it's just frustrating when people don't understand how it works and make you feel bad for using benefits you earned.

dont let ignorant people make you feel bad about using a system you paid into. thats on them for not understanding how insurance works

So there's a cap on how much wages the tax applies to? That's interesting.

Yes, it's called the taxable wage base. It gets adjusted periodically. The idea is that unemployment benefits have a maximum amount, so there's no need to tax wages above a certain level.

That's exactly how I felt! It helps to know this is actually insurance and not just government assistance.

States can borrow from the federal government if their trust funds become insolvent. Then they have to pay it back with interest, usually by raising employer tax rates. This happened to many states during the Great Recession.

Washington actually managed their trust fund pretty well and didn't have to borrow during COVID like some other states did.

Employers pay unemployment taxes regardless of whether individual terminations result in UI claims. But if you're fired for misconduct, you typically won't qualify for benefits, so that termination won't increase their experience rating.

Ah ok so they pay the taxes no matter what but their future rates depend on how many of their former employees actually collect benefits?

Exactly. It's about the claims that are charged to their account, not just the act of terminating employees.

How much does it cost? I've been trying to reach them about an adjudication issue for weeks.

It's worth it if you really need to talk to someone. Check out their site and the demo video to see if it makes sense for your situation.

I feel your frustration but at least knowing how the funding works helps me explain it to people who think it's coming from their taxes.

Fair enough. I'm just so fed up with the delays and bureaucracy. The funding system makes sense but the administration is terrible.

Same here! It's nice to have the facts when people make ignorant comments.

That's a good point. It's just a normal business expense that employers plan for.

Exactly. Larger companies with HR departments definitely factor UI taxes into their labor costs and budgeting.

Not a dumb question at all! I think a lot of people don't understand how the system works.

In Washington, there's no voluntary UI program for self-employed individuals. You have to be a traditional employee to build eligibility. Though there were special pandemic programs for self-employed folks, those ended.

Makes sense. I guess that's why being an independent contractor has more risk.

Good to hear another success story. I might need to use that if I have issues with my weekly claims.

Yeah, the regular phone system is just impossible. This at least gives you a real chance of getting through.

Perfect summary! This is exactly what I needed to understand. Thank you everyone for explaining this so clearly.

This thread should be required reading for anyone who wants to complain about unemployment benefits. Great information.