UI, referred to as unemployment compensation in some states, is based on a dual program of federal and state statutes. The federal program is mainly implemented through the Federal Unemployment Tax Act while each state administers a separate unemployment insurance program, based on federal standards. A combination of federal and state law determines which employees are eligible for compensation, the amount they receive, and the period of time for which benefits are paid.
To help employers understand the complex system of multiple trust funds, tax rates, and benefit levels, but also meet the necessary state and federal UI regulations, we have created a blog series outlining different aspects of the UI system in different states.
Overview of Pennsylvania Unemployment Compensation
Unlike other states that refer to UI tax, Pennsylvania government offices use the terms Unemployment Compensation and UC tax. The Pennsylvania Department of Labor & Industry (DLI) is responsible for administering the Pennsylvania Unemployment Compensation Law which requires employers to pay contributions into a pooled reserve known as the Unemployment Compensation Fund. This fund pays benefits to employees who become unemployed through involuntary causes.
Pennsylvania unemployment compensation has some basic rules that employers need to follow for it to operate smoothly and protect the benefits of Pennsylvania’s workers. Therefore, employers who pay wages for employment covered by Pennsylvania unemployment compensation are required to:
- Register with the Department of Labor & Industry;
- Maintain certain employment records;
- File quarterly reports of wages paid and contributions due;
- Pay the employer contributions due on such quarterly reports;
- Withhold and remit any employee contributions due on such quarterly reports for quarters during which employee contributions are in effect; and
- Respond timely and adequately to the department’s request for information regarding an individual’s eligibility for compensation.
Employers need to register for their unemployment tax account within 30 days of employees performing services covered by the state’s UC law. They can register for an account with the DLI either online or on paper and once registered, they will be issued a UC account number. To register online, employers use the PA Biz Online website. There are two possible formats to do so, an Online Business Registration Interview or an online version of Form PA-100, the Enterprise Registration Form. To register on paper, employers use Form PA-100. This registration process allows employers to register with the DOR for other business tax purposes beyond unemployment compensation.
If employment is covered under the Pennsylvania unemployment compensation law, employers are responsible for UC coverage of their employees. Most employers use the Contributory financing method where employers pay contributions based on a taxable wage base paid annually to each employee. In addition to this method, political subdivisions and certain nonprofit employers can use the reimbursable method.
Failing to comply with Pennsylvania’s unemployment compensation law can result in different violations, including:
- Failure to register as a Pennsylvania employer; and
- Failure to report all employees and the wages being paid to them and payment of employee compensation under the table.
In addition to this, if an employer attempts to assist an employee who is filing a fraudulent claim for Pennsylvania unemployment compensation benefits, this is considered fraud.
Employee Eligibility for Benefits
Employees or claimants may be entitled to Pennsylvania unemployment compensation benefits if they meet these eligibility requirements:
- Are able to work and available for suitable work;
- Earned enough wages to qualify and have sufficient credit weeks;
- Performed services covered by the Pennsylvania unemployment compensation law for an employer that is covered by the Pennsylvania unemployment compensation law;
- Are unemployed through no fault of their own or due to a work stoppage that is the result of a lockout;
- Have filed an initial application for unemployment benefits;
- Are unemployed for a waiting period of one week after filing the initial application for benefits; and
- File claims for weeks they are unemployed;
To receive UC benefits, claimants are required to file an Application for Benefits. Also, it is the responsibility of the claimant to be eligible and remain eligible for benefits. They may not be entitled to receive Pennsylvania unemployment compensation benefits or they may lose their eligibility to receive benefits if they fail to meet all the requirements of the Pennsylvania unemployment compensation law and regulations.
Overcoming Disparities in Pennsylvania Unemployment Compensation
The Pennsylvania DLI has secured a $3 million federal grant to address disparities in the state’s unemployment compensation system with the help of community organizations. The department plans to use the grant to improve access for specific groups of underserved Pennsylvanians, including workers with limited English proficiency in Philadelphia and Pittsburgh, workers in low-income communities with limited access to technology, as well as individuals with intellectual disabilities. Pennsylvania is one of just seven states to receive a grant from the U.S. Department of Labor funded by the American Rescue Plan Act. The grant will run for three years.
Unemployment tax obligations are inevitable for every employer, but there are steps they can take to handle them more effectively, primarily through lowering the rate of employee turnover and reducing the number of former employees who file for unemployment benefits during the calendar year. Apart from this, employers need to understand how the UI system works as well as the different state and federal requirements that they need to meet. Finally, outsourcing unemployment claims management relieves employers of time-consuming and complex tasks associated with handling UI responsibilities and allows them to stay compliant and focus on the areas of their business that actually generate revenue.