If you’ve lost a job recently, unemployment insurance can help fill in the financial gaps.
Before you apply for unemployment, it’s crucial to understand how it works, from filing your claim to getting the benefits.
Read on to discover more about unemployment insurance and what it can do for you in your time of need.
What is Unemployment Insurance?
The purpose of the unemployment insurance program is to provide partial wage replacement for employees who have lost their job. In most cases, you must either be laid off or let go according to your state’s specific guidelines. If you quit your job or you’re self-employed, you may not be eligible for unemployment benefits.
Most states have their own specific eligibility requirements in order to qualify for unemployment insurance benefits. However, with the recent COVID-19 pandemic, the federal government is stepping in and making some sweeping changes.
The purpose of this government benefit is to help workers fill in the gaps when they lose their income. In most cases, you won’t receive the full paycheck you got when you were gainfully employed, but you’ll get a set percentage.
If you’re not sure about what types of benefits you can expect, you should contact your state unemployment insurance division as soon as possible. Depending on the circumstances, you may be able to receive more money if your job loss is directly related to the COVID-19 pandemic.
How Does it Work?
Unemployment is a joint program that is partially regulated by the federal government, and partially by each individual state government. The purpose is to give people a financial safety net while they’re temporarily out of work.
The U.S. Department of Labor sets the general guidelines, but individual states can implement other specifics to determine things like benefit amounts and other eligibility guidelines. You’ll need to apply for state unemployment insurance when you lose your job, which is offered by your local department of labor.
You can apply for unemployment insurance online if you have all of the details available to provide to your local unemployment office. Once you apply, they’ll notify you of your eligibility for unemployment benefits and compensation. The process to file an unemployment claim can be time-consuming, but it’s worth it to receive a check that can help you pay for bills and other crucial expenses while you search for another job.
When Was Unemployment Insurance Created?
After the Great Depression, the Social Security Act was passed in 1935. This federal law is the very beginning of unemployment insurance, and it created a national program that was designed to help unemployed workers in need.
The concept of the plan was (and still is) to help relieve some of the financial hardship that comes with losing a job. As a result, offering this type of cash benefits can help to stabilize the economy and prevent things like the loss of a home or the inability to feed your family.
Today, you will receive weekly benefit checks once you file and are approved for unemployment insurance. President Franklin D. Roosevelt signed the Social Security Act into law in 1935, and although changes have been made since, the main principle still applies today.
Who Pays for Unemployment Insurance?
Employers pay for unemployment insurance through taxation, such as payroll taxes These taxes are collected via the U.S. Department of Labor unemployment insurance plan. All businesses that have employees must pay for unemployment insurance.
Overall, unemployment insurance is federally funded, and then the money is administered and monitored by the individual states. The rates your employer may pay will vary depending on their size, their annual revenue, and other factors.
Employers contribute 6 percent in federal taxes on the first $7,000 in annual income earned by each individual employee. Those who pay on time may receive a 5.4-percent tax break. The dollar figured collected depends on the state, and some states collect taxes up to the first $34,000 earned by an employee.
What is Unemployment Insurance Benefits, and How Much is It?
Unemployment insurance gives unemployed workers a check to cover their basic expenses while they’re out of work. Those dealing with layoffs can get this insurance easily, while others may need to attend a hearing to discuss their reason for being let go from an employer.
The idea of this type of insurance is to provide a temporary, partial replacement of lost wages. The amount that you receive depends on what you earned from your previous employer. Each state uses a specific formula to determine the amount of your benefit payment.
Some states may look at your prior annual earnings, while other states may look at what you earned during the highest-paid quarter of your base period. Regardless of the formula used, every state has an upper limit on the maximum weekly benefit amount you can receive.
For many workers, the formula pays half of what you used to earn in addition to a cap that is tied to the average earnings within your state. If you have dependents, you may be eligible to receive a small additional benefit of around $25 or less per dependent, per week.
Recent laws regarding the coronavirus crisis have raised the amount of unemployment insurance benefits significantly. This means you may be able to receive what you used to earn in full. Check the Department of Labor website frequently to find out what the latest law will mean for you.
The amount of unemployment compensation you receive could change depending on the new laws related to COVID-19. It’s best to speak with your local unemployment office to find out more information before you file an unemployment claim. Once you file a claim, you should receive a written notice alerting you to the amount of money you will receive each week.
On average, these cash benefits last for around 26 weeks. However, in times of crisis or national economic hardship, unemployment benefits are often extended well past the 26-week period. The federal government also offers an extended benefits program for those who can demonstrate unusual circumstances and hardship.
Who is Eligible, and is Unemployment Insurance Taxable?
You may be wondering if you’re eligible for unemployment insurance. If you have suffered a layoff or have lost your job as a result of the business closing, you’re eligible to apply for benefits.
Complete your application form thoroughly and accurately in order to speed up the process. Currently, COVID-19 has caused unemployment claims to skyrocket, so you may have to wait longer than usual to receive any benefits.
It’s important to note that unemployment benefits are taxable and that you can opt to take approximately 10-percent of your amount taken out to cover the cost of federal income taxes. If you earn any other income while you receive these benefits, it can reduce the total amount that you qualify for.
You must report any and all earnings to your state unemployment agency. They will determine if your benefits should be reduced or not depending on your specific situation.
It’s wise to opt for the 10-percent tax deduction before you receive your benefits. This will help you avoid possibly owing when you go to file your annual federal income tax return.
While unemployment insurance may not cover all of your important expenses, it’s a helpful program that can compensate you for some of the wages you’ve lost. The Coronavirus Relief Bill is offering benefits to more people than ever before, including freelancers and gig workers.
Check the current news and updates frequently to find out if you’re eligible for unemployment insurance and what kind of benefits you can expect to receive. This program is designed to help workers in need during difficult times. Don’t be ashamed to apply if you find yourself out of a job.
Making Unemployment Work for You
During these difficult and unprecedented times, unemployment insurance will likely help more people than ever before. Make sure you speak with your local unemployment office or state department of labor as soon as you think you need to file a claim.
Even if you don’t receive the full amount of pay you once did, anything to fill in the gaps can be of great help. Read the latest updates on the current situation to help you navigate this turbulent time and make unemployment insurance work for you. For more information about how you can lower your bills, check out our Financial Resource Center.