Unemployment Insurance

Unemployment insurance is an insurance by which people may receive benefits if they have faultlessly lost their jobs and meet other eligibility criteria. Workers who voluntarily terminate employment, and those who are self-employed, are not eligible for unemployment insurance and must use personal funds to cover situations when no work is available. State governments pay unemployment insurance from a fund of unemployment taxes collected from employers.

The unemployment initiative is a joint program between individual state governments and the federal government. Unemployment insurance provides cash stipends to unemployed workers who actively seek employment. Compensation to eligible, unemployed workers is through the Federal Unemployment Tax Act (FUTA) along with state employment agencies.  

Each state has an unemployment insurance program, but all states must follow specific guidelines outlined by federal law. Federal law makes unemployment benefits relatively ubiquitous across state lines. The U.S. Department of Labor oversees the program and ensures compliance within each state.

Workers who meet specific eligibility requirements may receive up to 26 weeks of cash benefits a year. The weekly cash stipend is designed to replace half of the employee's regular wage, on average. States fund unemployment insurance using taxes levied on employers. The majority of employers will pay both federal and state unemployment FUTA tax. Companies that have 501(c)3 status do not pay FUTA tax. Three states also require minimal employee contributions to the state unemployment fund.

Out of work persons who do not find employment after a 26-week period may become eligible for an extended benefits program if it is available. Extended benefits give unemployed workers an additional 13 to 20 weeks of unemployment benefits. The availability of extended benefits will depend on a state's overall unemployment situation.

There are two primary requirements an unemployed person must meet for unemployment insurance benefits. An unemployed individual must meet state-mandated thresholds for either earned wages or time worked in a stated base period. The state must also determine that the eligible person is unemployed through no fault of his own. A person may file unemployment insurance claims when fulfilling these two requirements.

Individuals file claims in the state where they worked. A participant may file claims by phone or on the state unemployment insurance agency's website. After the first application, it will take two to three weeks for processing and approval of a claim. 

After approval of a claim, the participant must either file weekly or bi-weekly reports that test or confirm their employment situation. Reports must be submitted to remain eligible for benefit payments. 

An unemployed worker cannot refuse work during a week, and on each weekly or bi-weekly claim, they must report any income that they earned. Reportable income includes freelance work or work they were paid for in cash.