Definition - What does covered employee mean?
A covered employee is a person who is eligible for unemployment insurance benefits from the state and federal unemployment insurance programs in the event that they become unemployed through no fault of their own. Employers contribute to unemployment insurance tax relating to the covered employee.
SureHire explains covered employee
A covered employee is an employee who is eligible for unemployment benefits if certain conditions are met during and after job loss.
Companies must pay into the unemployment insurance plans through taxes for covered employees. The covered employee's remuneration is used to determine the unemployment insurance tax payable to the state. The employer is responsible for the payment of the unemployment tax on behalf of the covered employee. The employer may also have to reimburse the state for benefits claimed by a past covered employee.
Employees who receive commission-only remuneration packages or are employed by religious organizations are examples of individuals who do not fall under the state and federal unemployment insurance programs.