How Do Unemployment Benefits Work?The joint federal-state Unemployment Compensation (UC) program funds unemployment benefits jointly. The UC program is funded by tax collection, and it acts as a check-and-balance mechanism during economic fluctuations like a recession. When the economy is growing, tax collection grows along with the funds in the UC program. When the economy slows down, the funds are disbursed to "cushion" the effects of the recession. The government insures people who have lost their source of income with a weekly stipend to sustain basic expenses for a maximum of 26 weeks in most states. Eligible applicants may get an extension of 13 or 20 weeks under the Extended Benefits (EB) program. Certain workers may get additional support under different programs. More than 50 programs work under broader federal guidelines to determine eligibility, benefits period, and other terms of unemployment benefits in different states. You can be eligible for unemployment benefits if you are able to work, available, and actively searching for work. The state will help you get job offers, as per state laws, and you may not be able to refuse them without a reasonable cause and maintain UC eligibility. The amount you are eligible for depends on-
- Past Wages: You may be required to earn a minimum wage on your previous job to be eligible for UI benefits during the base period. Some states may put a flat dollar amount while others follow the highest quarter earnings during the base period.
- Base Period: Your past wages are determined on the base period, a set period of employment before you lose your job. Each state defines its definition of the base period.
- State Eligibility Requirements: The state laws provide different eligibility criteria to calculate the final UI benefit amount. Your application will be evaluated by state agencies individually.
Unemployment Under the CARES ActThe federal government introduced Coronavirus Aid, Relief, and Economic Security (CARES) Act on March 21, 2020, to provide unemployment relief during the pandemic. It brought three important changes-
- Federal Pandemic Unemployment Compensation (FPUC) provided an additional $600 per week for existing unemployment benefit holders.
- Pandemic Emergency Unemployment Compensation (PEUC) allowed thirteen or twenty weeks of additional benefits to people who have already exhausted their UI benefits.
- Pandemic Unemployment Assistance (PUA) brought self-employed freelancers and contract workers into the eligibility criteria for unemployment benefits.
Unemployment Benefits After the CARES Act Has ExpiredThe CARES Act has an economic outlay of $2 trillion, most of which is spent on the economy through various incentives. However, the federal government is reducing overtime to avoid inflation and labor shortage. Two provisions from the CARES Act, FPUC ($600 additional UI benefits) and PEUC (extension period), expired on September 6, 2021, after which many people stopped receiving their UI benefits. However, the federal government left the PUA clause unchanged for contract and gig-workers, and self-employed freelancers, due to which you may find relevant unemployment benefits for your situation.
Can You Get Unemployment Benefits If You Own a Business?You can draw unemployment benefits based on drawing income from your business. If you draw a business income while claiming UI benefits, you may run into trouble later. However, if you increase your business expenses to buy new items for business purposes and do not draw any salary, you can be eligible for UI benefits. The CARES Act provided some UI benefits to small business owners who faced a loss of work due to the pandemic. The actual benefits depend on your state's implementation of federal guidelines. Most unemployment benefits have expired by 2021, and business owners may not get the benefits for the following year. However, can you get unemployment if you own your own business in 2022? Some states have started implementing stricter criteria for receiving unemployment benefits. This may include-
- FPUC grants were reduced in December 2020 in most states to $300 from earlier $600 per week.
- PUA grants, which provided $300 support in the form of federal aid to self-employed people (part-time workers and freelance workers), were stopped in certain states.
- PUEC grants, used for extension of UI benefits, were stopped in certain states. Most states provide 26 weeks of extension, with some low EB states like Alabama, Missouri, and North Carolina providing an extension of only 20 weeks.
- The states of Idaho and South Dakota did not participate in the Mixed Earner Unemployment Compensation (MEUC), which provides $100 weekly benefits to people who earn from self-employment or a mix of employment.
How to Apply for Unemployment BenefitsYou can apply for unemployment benefits through the following steps
- Identify Eligibility under State Laws- You may inquire about the current state laws before applying for the benefits to avoid rejection.
- Contact State Unemployment Insurance Program: Contact your state UI benefits agency to file an official claim for unemployment benefits.
- Provide Information: You may be asked to provide pay stubs, income tax returns, and previous employer details to process your claim.
- Receive Benefits: Your claim usually gets settled within 2-3 weeks of filing, and you can receive your first check within four weeks in most states. You will get the UI benefits in weekly payouts.
- Continue Eligibility: You may need to participate in job searches, often with assistance from the state agency. You may also need to file weekly (or biweekly in some states) to continue your UI benefits by stating your weekly earnings and effort to find a new job. The whole process can be done through mail, but you may have to report to the Unemployment Center when called on for mandatory training or career assistance programs.
- Discontinuation: Your state may offer you jobs within the purview of state laws, and if you take the job, your UI benefits will get discontinued.
What to Do If You Are Ineligible for Unemployment Benefits?Unemployment benefits should not be the cornerstone of your finances. Unemployment benefits have been shrinking with rising inflation and labor shortages across the US. If you are denied unemployment benefits during your first claim, you can appeal the denial within 10-30 days (depending on the state). The state will conduct a hearing session, and you may be required to appear during hearings, furnish a doctor's certificate, employer witness proofs, etc., to solidify your appeal. You may be eligible for a personal loan for relief designed for the unemployed. You may be charged a higher than the average interest rate, but it can cushion your immediate fund crunch. You can also communicate with creditors to seek beneficial circumstances on your financials.