Insurable earnings are any types of earnings generated from insurable employment. As it relates to unemployment benefits, this would encompass any type of benefits that are paid to an employee in exchange for services rendered. Insurable earnings are often tendered as cash, but may also be provided in some other such as a benefit or gratuity.
The most common examples of insurable earnings have to do with the wages and salary provided to employees for services rendered. In terms of wages, the pay may be in the form of a fixed rate per hour of service, or based on the number of assigned tasks completed over the course of the pay period, a process that is sometimes called piecework. The provision of a salary, essentially a fixed amount of pay for each pay period, is also considered a type of insurable earnings.
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Other forms of compensation also fit into the broad category of insurable earnings. Commissions and bonuses that are sometimes granted above and beyond wages and salary are included. Benefits such as pay for personal days, sick pay, and vacation time are also considered insurable for tax purposes. In some instances, providing room and board for employees would also fall into this category.
In terms of taxes, insurable earnings are generally subject to taxation. This makes it necessary for any form of the earnings to be reported to local, state, and federal tax agencies. Typically, the calculation of taxes due for a given period are based on the sum total of the wages, salaries, commissions and other forms of insurable earnings that are received by the employee during that specific pay period. Employers normally manage this reporting and calculation for each employee, withholding the appropriate amount of taxes and forward those taxes to the proper tax agency or agencies.
Identifying these benefits as insurable earnings is important, since the total amount of the compensation does have some impact on the amount of unemployment coverage and compensation that the individual may receive should he or she become unemployed under certain terms and conditions. While unemployment laws vary widely from one jurisdiction to another in terms of which events are eligible for unemployment compensation, calculating the compensation based on insurable earnings is very common. For this reason, employers are often required by law to report each type of earning as a separate line item on employee earnings statements or wage slips, making it easy to verify every type of relevant compensation tendered for the period under consideration.