How Does Unemployment Work?

Employment experts explain how to determine your eligibility and how to apply for benefits.

By Camilla Andersson, Monster Contributor

Losing a job not only feels like a career setback—in most cases, it can also have a direct impact on our finances as well. Filing for unemployment benefits as soon as possible can help make up for lost income.

How does unemployment work, and what are the requirements for receiving UI benefits? We’ll go over what you need to know, including how to qualify for unemployment and how to apply for unemployment.

What Is Unemployment Insurance?

Unemployment insurance (UI), also called unemployment benefits, are state programs that provide temporary income to people who lost their job through no fault of their own. Each state determines its own requirements for unemployment, as well as what agency is responsible for them. For instance, California offers UI through the Employment Development Department of California, and Texas UI is handled by the Texas Workforce Solutions Commission.

Can You Get Unemployment if You Get Fired?

When it comes to unemployment eligibility, generally, all states require that a person is unemployed through no fault of their own to be eligible for UI benefits. This means in many cases, you’ll only get unemployment if you were laid off, but not if you were fired. If you’re not sure of the difference, read more in our article about being laid off vs. fired.

Many states have some exceptions to this rule, however. For example, you might still get unemployment if you were fired for performance issues rather than misconduct. The definition of misconduct varies from state to state but can include:

  • committing a crime, such as theft or vandalization
  • abusing drugs or alcohol at work
  • breaching safety protocols
  • offensive behaviors, such as threats of violence, bullying, or stalking

If you were wrongfully terminated, or otherwise don’t agree with the employer regarding the circumstances of your job loss, you may wonder: how does unemployment work in these cases? Your former employer can contest your eligibility for benefits after you apply. In this case, the state agency will typically interview each party separately over the phone and make a decision. If you’re denied benefits, you can file an appeal.

Can You Get Unemployment if You Quit?

How does unemployment work if you left your job voluntarily? Just like if you were fired, you typically will not be eligible for unemployment if you quit your job. Some states have exceptions to this rule as well. For example, you might qualify for benefits if there was a good cause for you to quit your job, such as a hostile work environment.

Can You Get Unemployment if You’re Self-Employed?

In most circumstances you can’t get unemployment if you were a freelancer, self-employed, or an independent contractor prior to losing your income, because most self-employed workers have not paid into their state’s unemployment insurance fund. However, some states—like New York—have exceptions for this.

How Long Do You Have to Work to Get Unemployment?

You must have worked for a certain period of time prior to claiming unemployment, often called a “base period.” The base period, often counted quarterly, typically doesn’t include the period when you filed for unemployment. Your eligibility for unemployment will depend on how much you earned during the base period or how many hours you worked, not specifically when you started the job.

This is an example of how unemployment benefits are calculated in California:

The base period is based on a four-quarter period. During this time, you must have earned at least:

  • $1,300 in the highest-earning quarter of your base period.
  • $900 in your highest-earning quarter and total base period earnings of 1.25 times your highest quarterly earnings.

How to Apply for Unemployment

You typically file for unemployment benefits in the state where your last job is based, even if that isn’t the state you live in. State agencies usually offer more than one way to apply for unemployment, so you can apply online or by phone, fax, or mail. Each state has a specific website and organization through which you can manage your unemployment claim. In most cases, you will need to create an account where you can apply for and monitor your UI status,

In your unemployment application, you’ll typically need to provide relevant information, including:

  • employment history
  • identification documents
  • previous income
  • why your job was terminated
  • contact information
  • bank account information for direct deposit

How Long Does It Take to Get Unemployment?

Some states have a waiting period, typically around a week after a job loss, before you can start earning unemployment. You should apply for benefits right after you last day at your job, however. It might take a couple of weeks for the first payment to arrive.

Administrative factors can delay the arrival of your checks, for example if the office has questions about your application. If you’ve gone a month or more without any payments, you can contact your state’s unemployment office to ask about the status of your application. The best way to avoid delays is to take the time to submit all the information, and double-check that it’s correct, when you apply.

How Does Unemployment Work?

You’ve applied, your claim has been accepted, and you’ve received your first check. Time to sit back and wait for the job offers to start pouring in, right? Wrong!

Once you’re in the system, you’ll need to show proof that you are actively searching for a new job in order to receive your next payment. You might have to submit weekly reports online that list any job-seeking activities you’ve engaged in, including applying for jobs, networking, updating your resume, and going on interviews. Sometimes you’ll have to meet with a counselor.

In order to quality for your weekly unemployment benefits, you’ll also need to:

  • Be available to work. You must be available to accept a job and start working right away during the weeks you get unemployment benefits. This means you might be ineligible if you’re travelling or if you’re too sick to work.
  • Report any income. Freelance work or another source of extra income will reduce your weekly payment. If you make over a certain amount, you might not qualify for any benefits. If you’re getting severance payments from your last job, your ability to earn unemployment will vary depending on state laws.
  • Respond to job offers. You must be willing to accept suitable employment, which typically means a job similar to your most recent employment and at a reasonable pay rate for the location and profession.

How Long Does Unemployment Last?

The state that you filed in determines how long your unemployment will last. Most UI programs run for around 26 weeks, but some states have shorter time spans. You can check your specific state’s UI website to confirm the length of the benefits. In the past, the government has also extended benefits during times of economic downturns.

Of course, just because you might be entitled to around six months of benefits doesn’t mean it’s automatic. You’ll need to continue to document your job search and file claims. If you break some of the terms above, by traveling abroad without notice or stop looking for job, you can lose your benefits and in some cases be held liable for unemployment fraud.

Can You Get Unemployment if You Work Part-Time?

If you lost a part-time job or take on a part-time job while earning benefits, you might wonder how does unemployment work for part-time workers? Part-time workers can often earn part-time unemployment as well. In both these cases you’ll earn less than you would if you worked full time.

Even if your part-time work decreases the amount you can collect in unemployment benefits, working part-time has other benefits. It can help move your career forward by decreasing gaps on your resume, giving you new references, and increasing your self-confidence. In some cases it will also extend the amount of time you can earn benefits.

Who Pays for Unemployment?

Private employers pay for unemployment through payroll taxes. In some states, employees also contribute a small amount to unemployment through taxes. Each state has its own method for calculating tax rates. How does unemployment work for the employer? In general, employers have a higher tax rate if a lot of former employees file for unemployment, so the employer has an incentive to avoid going through huge hiring and layoff cycles.

Is Unemployment Taxable?

How does unemployment work when it comes to taxes? “(Unemployment) benefits received are subject to federal income tax and need to be reported on your federal tax return,” says Mary Cavanaugh, vice president, senior consultant, Keystone Associates.

As per the Internal Revenue Services, if you received unemployment compensation during the year, you should receive Form 1099-G showing the amount you were paid. That form should be filed and the amount of unemployment compensation will be included in your income.

You do have the option to withhold federal taxes from your unemployment checks so you’re not left with a surprise bill come April 15, but that will reduce how much money you receive in your weekly unemployment payment.

When it comes to state taxes, each state has their own rules for this.

Move On to Your Next Job With Monster’s Help

Knowing how unemployment works is essential to bridging the gap when you’re between jobs. Use your job loss as an opportunity to further your career when you create a free profile on Monster. We’ll send free job alerts and career advice right to your inbox to help you move on from receiving unemployment benefits to a hefty paycheck when you find your next job.

This article is not intended as a substitute for professional legal advice. Always seek the advice of an attorney regarding any legal questions you may have. For more information on unemployment insurance benefits, visit the United States Department of Labor website.