Chapter 5.
Employment and Wages Covered by Unemployment Insurance
Concepts and Methodology
Scope of coverage
In 1938, UI coverage and, consequently, ES-202 reporting
requirements, extended only to private firms employing
eight or more persons at least 20 weeks a year; certain
employee groups were exempt. Insurance coverage was
successively broadened, to include Federal civilian
employees1(1955);
firms employing four to seven employees (1956) and
exmilitary personnel2(1958); firms employing one to three employees; and
State colleges, universities, and hospitals (1972). In
1978, coverage was extended to nearly all other State and
local public employees, to agricultural firms employing a
minimum of 10 workers in at least 20 weeks a year or
having a $20,000 quarterly payroll; and to employers
paying a quarterly minimum of $1,000 to domestic workers.
UI coverage is broad and basically comparable from
State to State. In 1994, UI and UCFE covered over 112
million jobs, or over 96 percent of total wage and salary
civilian jobs. Covered workers received $3.0 trillion in
pay, or 92.5 percent of the wage and salary component of
national income.
Over the years, many States have legislated
unemployment insurance protection for additional
categories of workers above the base established through
Federal legislation. Details on coverage laws are
provided in Comparisons of State Unemployment
Insurance Laws, available upon request from the
Employment and Training Administration of the Department
of Labor.
When UI-covered private industry employment data are
compared directly with other employment series, the
industry exclusions also should be taken into account.
Excluded from private-sector coverage in 1994 were
approximately 0.2 million wage and salary agricultural
employees, 1.6 million self-employed farmers, 9.0 million
self-employed nonagricultural workers, 0.6 million
domestic workers, and 0.2 million unpaid family workers.
Also excluded were 1.4 million members of the Armed
Forces stationed in the United States, 0.3 million
workers covered by the railroad unemployment insurance
system, and about 0.7 million State and local government
workers. In addition, certain types of nonprofit
employers, e.g., religious organizations, are given a
choice of coverage or noncoverage in a number of States.
Establishments and reporting units
An establishment is an economic unit, such as a farm,
mine, factory, or store, which produces goods or provides
services. It usually is at a single physical location and
engaged in one, or predominantly one, type of economic
activity, for which a single industrial classification
may be applied. Occasionally, a single physical location
encompasses two or more distinct and significant
activities. Each activity should be reported as a
separate establishment if separate records are kept and
the various activities are classified under different
4-digit Standard Industrial Classification (SIC) codes.
Most employers have only one establishment; thus, the
establishment is the predominant reporting unit or
statistical entity for reporting employment and wage
data. Most employers who operate more than one
establishment in a State file a Multiple Worksite Report
(MWR) each quarter, in addition to their quarterly UI
Contribution Report. The MWR form is used to collect
separate employment and wage data for each establishment
of these employers. Some very small multi-establishment
employers do not file a MWR. When the total employment in
an employer's secondary establishments (all
establishments other than the largest) is less than 10,
the employer will generally file a consolidated report
for all establishments. Some employers either cannot or
will not report at the establishment level and thus group
establishments into one consolidated unit, or possibly
several units, though not at the establishment level.
Prior to 1991, employers provided covered employment
and wages data on a "reporting unit" basis.
Reporting unit data typically provided detail only for
different county locations and/or industrial operations
within a State. Nonstandard forms, similar in concept to
the MWR and called the Statistical Supplement, were used
by States to collect these county/industry data. Although
reporting units were, for the most part, individual
establishments, employers could provide a summary of
their employment and wages data for multiple
establishments within a county that were conducting the
same type of industrial activity. For example, a
fast-food business may have submitted a report that
covered all its operations within a county prior to 1991;
on the MWR, the employer reports employment and wages
data for each individual location.
In government, the reporting unit is the installation
(a single location at which a department, agency, or
other government instrumentality has civilian employees).
Federal agencies follow slightly different criteria from
private employers in breaking down their reports by
installation. They are permitted to combine as a single
statewide unit (1) all installations with 10 workers or
fewer and (2) all installations which have a combined
total in the State of fewer than 50 workers. In addition,
when there are fewer than 25 workers in all secondary
installations in a State, they may be combined and
reported with the major installations. Lastly, if a
Federal agency has fewer than five employees in a State,
the agency headquarters office (regional office, district
office) serving each State may consolidate the wage and
employment data for that State with the data reported to
the State in which the headquarters is located.
As a result of these reporting rules, the number of
reporting units is always larger than the number of
employers (or government agencies) but smaller than the
number of establishments (or installations).
Employment
Employment data represent the number of workers on the
payroll during the pay period including the 12th day of
the month. The pay period varies in length from employer
to employer; for most employers, it is a 7-day period but
not necessarily a calendar week. An employer who pays on
more than one basis (such as weekly for production
employees and semimonthly for office employees) reports
the sum of the number of workers on each type of payroll
for the period.
The employment count includes all corporation
officials, executives, supervisory personnel, clerical
workers, wage earners, pieceworkers, and part-time
workers. Workers are reported in the State and county of
the physical location of their job. Persons on paid sick
leave, paid holiday, paid vacation, and so forth are
included, but those on leave without pay for the entire
payroll period are excluded.
Persons on the payroll of more than one firm are
counted in each firm. Workers are counted even though
their wages may be nontaxable for UI purposes during that
period (having reached the taxable limit for the year).
The employment count excludes employees who earned no
wages during the entire applicable period because of work
stoppages, temporary layoffs, illness, or unpaid
vacations, and employees who earned wages during the
month but not during the applicable pay period.
Total wages
Total wages, for purposes of the quarterly UI reports
submitted by employers in private industry in most
States, include gross wages and salaries, bonuses, stock
options, tips and other gratuities, and the value of
meals and lodging, where supplied. In some of the States,
employer contributions to certain deferred compensation
plans, such as 401(k) plans, are included in total wages.
Total wages, however, do not include employer
contributions to Old-age, Survivors', and Disability
Insurance (OASDI); health insurance; unemployment
insurance; workers' compensation; and private pension and
welfare funds.3
In most States, firms report the total wages paid
during the calendar quarter, regardless of the timing of
the services performed. Under laws of a few States,
however, the employers report total wages earned during
the quarter (payable) rather than actual amounts paid.
For Federal workers, wages represent the gross amount
of all payrolls for all pay periods paid within the
quarter. This gross amount includes cash allowances and
the cash equivalent of any type of remuneration. It
includes all lump-sum payments for terminal leave,
withholding taxes, and retirement deductions. Federal
employee remuneration generally covers the same types of
services as those for workers in private industry.
Taxable wages and contributions
Taxable wages are that part of wages subject to the State
unemployment insurance contribution tax. Contributions
(i.e., monies that are deposited in trust funds in order
to pay unemployment claims) are calculated on taxable
wages and are reported quarterly.
Under Federal Law, certain units of State and local
governments and certain nonprofit establishments may
elect to reimburse the State for any unemployment
insurance claims that have been filed against them. These
reimbursable accounts are not subject to the quarterly
assessment for unemployment insurance funds; therefore,
their taxable wages and contributions are not reported.
In mid-1996, approximately 20 percent of the States
required that employers pay UI taxes on the first $7,000
of employee wagesthe minimum established by Federal
laws. The remaining States established higher limits on
taxable earnings. The portion of wages subject to
taxation has varied substantially over time. As of 1996,
about one-half of the States allowed employers to obtain
lower tax rates by making voluntary contributions to the
unemployment tax fund. The few States which tax employees
in addition to employers are requested to include
employees' contributions in their ES-202 report.
Industrial classification
Employment and wage data under the ES-202 program have
been classified by industry since 1938. Industrial codes
are assigned by State agencies to each reporting unit
based on responses to questionnaires in which employers
indicate their principal product or activity. If a
private or government employer conducts different
activities at various establishments or installations,
separate industrial codes are assigned to each
establishment, to the extent possible.
Since 1938, the industrial classification of business
establishments and government installations has undergone
a number of modifications. Until 1945, classification was
based on the Social Security Board Classification
Manual. At that time, the basis was changed to the Standard
Industrial Classification Manual, which has since
been revised several times. Establishments were
originally classified into 20 manufacturing and 60
nonmanufacturing groups, on a 2-digit basis. The number
of such groups has remained fairly constant. Three-digit
groupings were added in 1942, and 4-digit groupings were
added for manufacturing in 1956 and for nonmanufacturing
in 1968. In the Quarterly Census of Employment and Wages program,
statewide 4-digit classification of nonmanufacturing
became mandatory in 1978.
Since 1988, the 1987 Standard Industrial
Classification Manual has been used to classify the
industry of each establishment. (See appendix B in the
print edition of the BLS Handbook of Methods.)
The manual provides for 1,005 4-digit industries, 416
3-digit industries, 83 major industry groups, and 11
industry divisions. Of the 1,005 4-digit industries, 7
are not used in the Quarterly Census of Employment and Wages program
because of problems in obtaining systematic and accurate
information to code sufficiently at the 4-digit level.
In order to insure the highest possible quality of
data from the ES-202 program, BLS and the States verify
and update, if necessary, the SIC, location, and
ownership classifications of all units on a 3-year cycle.
Government units in the public administration industry
division, however, are verified less frequently.
Collection methods
State agencies collect ES-202 data on the quarterly UI
Contribution Report or MWR as a byproduct of the
administration of the UI program. Once new employers have
met the criteria for UI liability and registered with the
State agency, they begin the ongoing process of
submitting a quarterly UI report. Employers who have
ceased operations no longer report and are dropped from
ES-202 data.
State agencies send magnetic tapes or cartridges, or
electronically transmit their ES-202 data for nearly 7.0
million active establishments to BLS each quarter. Each
establishment is classified by its industrial activity
and then independently by 1 of 4 ownership categories.
Private industry has 6.6 million establishments; Federal
Government, 48,000; State government, 61,000; and local
government, 121,000. The State agencies code and
summarize the raw data from the UI Contribution and
Multiple Worksite Reports; check for missing information
and errors; prepare imputations of data for delinquent
reports; and finally, machine process the data. Five
months following the end of each quarter, the agencies
send these data to Washington.
In order to assure accurate data, BLS conducts several
additional edits of the data each quarter and then
requests State agencies to review questionable entries
and provide updates or explanations where necessary. BLS
has also developed an exportable macro-edit system for
State agency use so that there may be consistent and
efficient review of the ES-202 report. The macro-edit
permits State agencies to use their resources effectively
in the processing, review, and correction of data.
Footnotes 1Under the Unemployment Compensation
for Federal Employees (UCFE) program. 2 Under the Unemployment Compensation for
Ex-Servicemen (UCX) program. 3 Employee contributions for the same purposes,
as well as money withheld from the employee's gross pay
for income taxes, union dues, etc., are included in the
UI reports.
Next: Comparison
of the ES-202 Program With Other Series
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