What is covered employment?

Fran Valentine

Senior Director of Research, Analysis and Engagement, Indiana Department of Workforce Development

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Administrative data collected through the UI Program provides important information about our economy.

Economic data sets measuring employment and wages are key indicators for analyzing labor market and industry trends. How do we know how many people are working within a geographic region or within a specific industry? Are wages growing or declining? How quickly do people find employment after receiving a degree or completing training, and how much do they make? One avenue for obtaining employment and wage data for research is aggregated Unemployment Insurance (UI) Program records. Unemployment insurance is also known as unemployment compensation.

The Indiana Department of Workforce Development (IN DWD), along with all partner workforce agencies of the states, territories and federal civilian employers, collects covered employment data from employers through the UI Program. UI Program wage and employment records represent about 95 percent of all jobs in the country.1 Unlike survey-based data sets, which use a sample of the population to extrapolate to a whole, UI Program employment and wage data are collected from employers who are required to report, on a quarterly basis, this information to the state workforce agency for UI Program administration purposes.2

Covered vs. non-covered employment

Covered employment, for UI Program purposes, is work that is covered by UI benefits when a worker becomes unemployed. The wages and other compensation paid by an employer to an employee working or providing services in covered employment is subject to tax, and tax contributions are deposited in the state’s UI Trust Fund. If an employee becomes unemployed due to no fault of their own and is determined to be eligible for unemployment benefits, money is withdrawn from the UI Trust Fund to pay benefits to the unemployed person. All wages and compensation paid to employees for covered employment must be reported to the state workforce agency. This may include bonuses, stock options, profit distributions, the cash value of meals and lodging, and other gratuities—in addition to traditional hourly or salaried wages.

Employers who are liable for UI premiums in the state of Indiana include:

  • Regular business entities who pay $1 or more in remuneration to a covered worker, when not an agricultural business, a nonprofit or an employer of a household domestic worker. Nonprofits, agricultural businesses and domestic worker employers may still have liability; however, they do not become an employer with the first $1 in wages paid. (Indiana Code § 22-4-7-1, et seq.).
  • Partial or complete acquirers. Employers who have acquired all or part of the assets, including the workforce, of an organization, trade or business, resulting in a continuation of the same or similar trade or business are immediately liable in Indiana. (Indiana Code § 22-4-7-2(a) & (b)).
  • Federal Unemployment Tax Act (FUTA) liable entities. If an employer is liable in another state and employs workers in Indiana, the employer is also liable in Indiana. (Indiana Code § 22-4-7-2(f)).
  • Exempt entities that elect to be subject to the requirements of the Unemployment Insurance Program. An employer can elect to be subject to the requirements of the Unemployment Tax Act even if otherwise excluded. Certain limitations apply. (Indiana Code § 22-4-7-2(d)).
  • Agricultural entities that pay $20,000 or more in wages in a calendar quarter or have 10 or more agricultural employees for some part of a day for at least 20 weeks during a calendar year. (Indiana Code § 22-4-7-2(e)).
  • Government employers, including any state, municipality, Native American Tribe or similar entity, are liable for UI premiums with some exceptions. (Indiana Code § 22-4-7-2(g)).
  • Nonprofit entities that are recognized 501(c)(3) organizations that employ four or more individuals in at least 20 different weeks of the calendar year. (Indiana Code § 22-4-7-2(h)).
  • Households and certain fraternal organizations employing domestic help that pay cash wages of $1,000 or more in a calendar quarter. (Indiana Code § 22-4-7-2(i)).
  • Professional employer organizations are employers for all purposes under the Act when properly identified and registered. (Indiana Code § 22-4-6.5, et seq.).

These are some types of employment that are excluded from state UI reporting requirements; therefore, no data are present in state UI wage and employment records for the following:

  • Sole proprietors and partners in a partnership
  • Members of the clergy
  • Members of the U.S. armed forces
  • Government workers who are judges, legislators, elected officials, temporary or emergency-basis government workers, and those in designated advisory, non-tenured, policymaking positions
  • Students working for a school that they are attending
  • Railroad workers covered under the Railroad Unemployment Act
  • Agricultural, nonprofit and domestic workers where the employer does not have liability in Indiana as described above

Research and analysis use

Quarterly Census of Employment and Wages (QCEW)

The U.S. Bureau of Labor Statistics’ QCEW program publishes quarterly counts of employment and wages reported by employers through the UI Program. These data are published in aggregate at the industry level, without revealing company-specific or personally identifiable information, at the county, metropolitan statistical area, state and national levels. QCEW essentially cleans and analyzes UI administrative data at the micro-level for macro-level usage within a shared data framework system for all states. The data series includes ownership, number of units, average number of workers, total wages and calculated average weekly wage by location of employment.

QCEW data are considered foundational for labor market information and feed numerous programmatic applications, for both analytical and sampling use, such as economic forecasting, industry and occupational projections programs, Local Area Unemployment Statistics, Current Employment Statistics, Occupational Employment Statistics, and the Job Openings and Labor Turnover Survey, among others.

Longitudinal Employer-Household Dynamics

UI and QCEW data are shared with the U.S. Census Bureau under a national partnership with the states, District of Columbia, Puerto Rico and the U.S. Virgin Islands. Additional data sets are combined at the record level with Census data and surveys for insight into both employers and employees. From these data, the program creates statistics on employment, earnings and job flows at detailed levels of geography and industry for different demographic groups to be used by state and local authorities.

The popular On the Map and On the Map for Emergency Management LEHD mapping tools use these data to provide responsive data visualizations and reports for decision makers. Commuting patterns, worker demographics, job counts and wage data—all available with distance radius mapping—are just a few of the possible data sets available within On the Map using state-shared administrative UI data as an input.

In beta version as of fourth quarter 2018, the Post-Secondary Employment Outcomes (PSEO) program will harness the same state records matched with participating state-level public institution completion data to determine wage and employment outcomes over time for specific courses of study—all while protecting individual student records. For example, PSEO data can tell us that students graduating in the 2004-2006 cohort from the University of Colorado-Boulder in aerospace, aeronautical and astronautical engineering made on average $64,706 in the first year post-graduation and $102,242 10 years after graduating.

Statistical sampling and benchmarking

U.S. Bureau of Labor Statistics programs like Local Area Unemployment Statistics, Current Employment Statistics, Occupation Employment Statistics, Occupation Projections, and Occupational Safety and Health Statistics use this foundational data as a reference for benchmarking and sampling. In cases where specific areas are underrepresented due to UI tax liability, additional data sets are added to the universe of data to offset gaps in employment with UI reporting.

Workforce, training and higher education research

In addition to statistical use, federally protected UI administrative data can be used in accordance with federal regulations to help determine training and education outcomes by industry, employment gain and retention, and wages over time. Research projects are legally evaluated on a case-by-case basis to determine proper use, and security standards must be met.

Conclusion

As our reliance on data-driven policymaking to ensure workforce alignment increases, improved access to direct data from employers at the employee level becomes more imperative. At the same time, there is a need to reduce employer burden from information requests. By leveraging covered employment data within administrative record collection to provide optimal value, key research on our economy can be undertaken for the benefit of economists, social scientists, job seekers, policymakers, employers, employees, economic developers, and education and training providers.

Additional information

Notes

  1. For statistical purposes, federal data sets are used to supplement gaps in state UI covered employment. “QCEW Overview,” U.S. Bureau of Labor Statistics, July 18, 2018, www.bls.gov/cew/cewover.htm.
  2. States and territories may require reporting on a schedule other than quarterly.