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 wages—the 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