How Does Unemployment Insurance Work?

Can’t figure out how unemployment works? Continue reading this article to find out how unemployment insurance works and how you can be eligible for it.

Unemployment benefits were introduced in 1935 as part of President Franklin D. Roosevelt’s New Deal during the Great Depression. The 1935 Social Security Act ensured that Americans did not fall further into poverty. At the time, the United States was the only developed nation in the world that did not provide any welfare benefits. This program established unemployment insurance, Medicare and Medicaid, as well as maternal and child welfare.

Given the ongoing pandemic, it’s safe to say that people’s job security is in peril. During the COVID-19 Pandemic, approximately 9.6 million Americans lost their jobs. During the coronavirus pandemic, the federal government put in place provisions to assist unemployed Americans. Although each state has its unemployment insurance program, federal law requires all states to follow certain guidelines. Unemployment benefits are available across state lines under federal law. The United States Department of Labor oversees and enforces the program in each state.

In the United States, unemployment benefits totaled 2.7 billion US dollars in October 2021. This is a significant decrease from October 2020, when 8.33 billion US dollars in unemployment benefits were paid. The impact of the coronavirus pandemic is largely responsible for these figures.

This depicts that unemployment insurance has benefited people but now the question arises, how does unemployment insurance work? Keep reading this article for a detailed insight on unemployment insurance.

What is unemployment insurance?

NYS Unemployment insurance (UI), also known as unemployment benefits, is a type of state-provided insurance that provides an allowance to individuals when they are removed from their job due to lack of work or circumstances that are no fault of their own. This initiative is a joint program between the individual state government and the federal government.  You can receive Unemployment Insurance benefits for a maximum of 26 full weeks during one year called a “benefit year.”

Who pays for unemployment insurance?

Employer taxes, including state taxes (which vary by state), and the Federal Unemployment Tax Act (FUTA), which is 6% of the first $7,000 in wages for each employee, fund the regular UI program. Employers who pay their state unemployment taxes on time, on the other hand, receive a credit of up to 5.4 percent, meaning that the FUTA tax for an employee earning $7,000 or more could be as low as $42. The credit is reduced in states that are behind on their federal unemployment insurance payments.

While state unemployment insurance spending is not subject to balanced budget rules and states can borrow from the Treasury if their reserves are depleted, states must repay the federal government within two to three years or face increased federal taxes on employers until the debt is paid.

States have a lot of leeway’s when it comes to determining benefits. Federal requirements are minimal while ensuring that all states provide basic protection for eligible workers. The amount of the employer tax, the level, and duration of benefits, and the eligibility criteria, such as the extent and duration of prior employment, are all up to the states. How states implement this program varies greatly. For example, while the standard maximum time for eligible people to collect benefits is 26 weeks, states such as Florida and North Carolina were limiting state-paid benefits to only 12 weeks when the COVID-19 crisis began in late February 2020.

Do all the unemployed get unemployment insurance?

No, Most unemployed workers do not receive UI benefits in normal times. People who leave their jobs voluntarily, people looking for their first jobs, and people re-entering the labor force after leaving voluntarily are not covered by UI. Traditionally, self-employed workers, gig workers, undocumented workers, and students are not eligible for UI benefits.

Furthermore, most states require unemployed workers to have worked a certain number of hours or earned a certain amount of money from their previous employer to be eligible. In 2019, the minimum earnings required to qualify for UI benefits range from $1,000 to $5,000. The UI recipiency rate—the proportion of unemployed people who receive UI benefits—varies significantly across states due to differences in eligibility criteria. Mississippi had the lowest recipiency rate of 9 percent in the fourth quarter of 2019, while Massachusetts had the highest rate of 55 percent.

Another effect of the earnings and work history requirements is that low-wage workers, who are the most likely to become unemployed, are among the least likely to receive unemployment benefits. During the Great Recession, only one-quarter of low-wage workers—those earning less than their state’s 30th percentile wage—received unemployment benefits. Workers who earned more than the 30th percentile wage before losing their jobs were twice as likely to receive unemployment benefits. The main reason low-wage workers do not qualify for unemployment benefits is not because of their low hourly wages. Rather, low-wage workers tend to work intermittently, and most states require laid-off workers to have at least a year’s worth of consistent earnings to qualify for benefit payments.

What are the eligibility criteria for Unemployment Insurance?

The three eligibility requirements to collect unemployment benefits in New York are:

  • Your past earnings must meet certain minimum thresholds.
  • You must be unemployed through no fault of your own, as defined by New York law.
  • You must be available to work.

Do you meet the minimum earnings requirement?

All states look at your recent work history and earnings over a one-year “base period.” This enables them to assess your eligibility for unemployment benefits.

To determine your eligibility for unemployment compensation, almost all states look at your most recent work history and earnings over a one-year “base period.” In New York, as in most states, the base period is the four most recent full calendar quarters preceding the filing of your claim for benefits. If you filed your claim in October 2020, for example, the base period would be from June 1, 2019, to May 31, 2020.

New York recognizes an alternate base period for those who are unable to meet the earnings requirements during the regular base period. The alternate base period is the person’s most recent four completed quarters before filing for unemployment benefits. This alternate period takes into account more recent employment. Even filers who qualify using the regular base period can request that their benefits be calculated using the alternate base period if it results in a higher weekly amount.

Your work history and earnings must meet all three of the following requirements during the base period:

  • You must have worked in at least two of the four calendar quarters comprising the base period.
  • In 2021, you must have earned at least $2,700 in the highest-paid quarter of the base period.
  • Your total earnings in the base period must be at least one-and-a-half times your highest-paid quarter earnings. If you earned more than $11,088 in the highest-paid quarter, the agency will calculate your earnings for that quarter as $11,088. In other words, regardless of how much you earned in your highest-paid quarter, your total earnings during the base period cannot exceed $16,632 ($11,088 x 1.5).

Are you out of work through no fault of your own?

The NYS unemployment policy deems people who are laid off, lose their job in a reduction-in-force (RIF), or get “downsized” for economic reasons to be eligible for unemployment issuance. If you are fired because your employer assumes that you are unqualified for the job, or perhaps you fail to meet the employer’s performance or productivity standards, you will be eligible for unemployment benefits.

Following the policy, you must not be out of work due to any fault of your own.

In New York, employees who are fired for work-related misconduct may not be eligible for unemployment benefits. Violations of company policy or rules, such as those prohibiting absenteeism or insubordination, are examples of work-related misconduct. If you are fired for being convicted of a felony (or admitting to committing one), you will also be ineligible for benefits. If you quit your job, you will not be eligible for unemployment benefits unless you had a good reason to do so.

Are you available and actively searching for work?

To be eligible for unemployment insurance, you must be able to work, available to work, and looking for work. If a suitable position is offered to you, you must accept it. A suitable position is one that you are qualified for based on your education and experience. Even if the position pays less than what you used to make, you may not turn it down if it pays the prevailing wage for similar work. You must maintain written records (online or written) of your job search activities. If you are called in for a personal interview by a state agency, you may be asked to bring these records with you.

Special circumstances and unemployment benefits

●     Unemployment eligibility when you’re fired:

In the case you are fired from your job, you might still be eligible for unemployment, depending on the special circumstances surrounding your termination. For instance, if you feel as though you were terminated without any just cause, you might still be eligible, for this purpose contact your state unemployment department about your eligibility There are a variety of factors that will determine whether you can collect benefits.

●     Unemployment eligibility when you quit:

In most instances, if you quit your job out of your own volition, you are eligible for unemployment insurance. Provided that you quit your job for a valid cause you might be eligible for unemployment benefits.

●     Unemployment eligibility for self-employed workers:

In most cases, self-employed workers and freelance workers who lose their income are not eligible for unemployment benefits. However, if your business is incorporated and pays into unemployment, you may be eligible to collect unemployment benefits.

●     Unemployment when you work part-time:

Many states provide partial unemployment benefits to individuals whose work hours have been reduced through no fault of their own.

●     Unemployment when you’re pregnant:

Women who are pregnant or new mothers can also be eligible for unemployment benefits.

●     Enhanced and extended unemployment benefits:

Extended unemployment benefits for workers who have used all state benefits, as well as a temporary supplemental weekly benefit for all recipients may be available in your state.

How do you claim unemployment?

To receive unemployment insurance benefits, you need to file a claim with the unemployment insurance program in the state where you worked. Depending on the state, claims may be filed in person, by telephone, or online.

  • After becoming unemployed, you should contact your state’s unemployment insurance program as soon as possible.
  • In most cases, you should file your claim with the state in which you worked. If you worked in a state other than the one where you now live, or if you worked in multiple states, the state unemployment insurance agency where you now live can help you file a claim with the other states.
  • When you file a claim, you will be asked for information such as your former employer’s address and dates of employment. To avoid a delay in processing your claim, provide complete and accurate information.
  • Your first benefit check will usually arrive two to three weeks after you file your claim.

Weekly payment of unemployment insurance

Following is the list of Weekly Payments of UI for each state territory, and the District of Columbia according to DOL:

  • Alabama: $249.76
  • Alaska: $248.12
  • Arizona: $279.71
  • Arkansas: $219.86
  • California: $305.82
  • Colorado: $375.25
  • Connecticut: $322.22
  • Delaware: $265.17
  • District of Columbia: $358.36
  • Florida: $249.19
  • Georgia: $265.56
  • Hawaii: $466.14
  • Idaho: $287.42
  • Illinois: $333.48
  • Indiana: $261.65
  • Iowa: $327.79
  • Kansas: $344.13
  • Kentucky: $332.16
  • Louisiana: $186.59
  • Maine: $335.08
  • Maryland: $322.10
  • Massachusetts: $444.96
  • Michigan: $317.95
  • Minnesota: $374.58
  • Mississippi: $192.83
  • Missouri: $246.45
  • Montana: $341.37
  • Nebraska: $324.15
  • Nevada: $354.70
  • New Hampshire: $253.57
  • New Jersey: $419.10
  • New Mexico: $312.96
  • New York: $345.74
  • North Carolina: $223.21
  • North Dakota: $406.57
  • Ohio: $334
  • Oklahoma: $44.17
  • Oregon: $360.61
  • Pennsylvania: $344.86
  • Puerto Rico: $160.54
  • Rhode Island: $317.88
  • South Carolina: $246.60
  • South Dakota: $275.33
  • Tennessee: $269.06
  • Texas: $351.18
  • Utah: $343.05
  • Vermont: $348.51
  • Virgin Islands: $359.33
  • Virginia: $260.64
  • Washington: $497.40
  • West Virginia: $242.81
  • Wisconsin: $289.77
  • Wyoming: $378.37

In addition to the extra $600 per week, the CARES Act also extended the amount of time people can receive benefits, from around 26 weeks (though that also varies by state) to a maximum of 39 weeks. It also expanded the types of workers eligible to receive payments. Those two provisions are in place through the end of the year.

Do you qualify for the additional $600 in federal benefits?

Under the CARES Act, everyone receiving state unemployment benefits is eligible for an additional $600 in Federal Pandemic Unemployment Compensation benefits. The funds are available for any weeks beginning after the date agreed upon by the state until the week ending July 31. You do not need to apply for these benefits separately; if you are eligible, you will receive them from your state.

What happens after you exhaust my regular state benefits?

You may be eligible for additional benefits under the federal Pandemic Emergency Unemployment Compensation program, which is only available until December 31. Your regular state claim is used to determine approval: If you were previously eligible for state benefits, you are also eligible for this extension under the CARES Act. You must apply for them.

Based on the state’s unemployment rate, some states may be able to provide an additional 13 or 20 weeks of extended benefits, which will begin next. If you were eligible for regular unemployment benefits, you may also be eligible for extended benefits in your state.

What if you don’t qualify for regular unemployment benefits?

You may be eligible for federal Pandemic Unemployment Assistance (PUA) through the CARES Act, which is available until December 31. Your state determines the amount you will receive.

These benefits can last for a total of 39 weeks, which includes the number of weeks of regular and extended benefits from your state. As an example: If you received 13 weeks of state benefits plus 13 weeks of federal Pandemic Emergency Unemployment Compensation, you may be eligible for another 13 weeks under this program. You may be covered if one of the following conditions applies, among others:

  • You or someone in your home was diagnosed with COVID-19, or have symptoms and are waiting to be diagnosed
  • You’re caring for a family member or someone in your home who has COVID-19
  • You’re caring for a child whose school or childcare is closed because of COVID-19
  • You’ve been quarantined by a government body or medical professional
  • You’ve lost your job or cannot reach your job because of COVID-19
  • You’ve become the main source of income for a household due to a death caused by COVID-19
  • You’ve quit your job because of COVID-19
  • Your workplace is closed because of COVID-19
  • You were scheduled to start a new job but could not because of COVID-19

Self-employed workers, independent contractors, gig economy workers, and people who have not worked long enough to qualify for other types of unemployment assistance may still be eligible for PUA if they meet one of the COVID-19 reasons listed above. States must first ensure that these workers are not eligible for regular unemployment benefits.

For what reasons can unemployment be denied?

If your unemployment claim is denied, you will receive a Notice of Determination from the New York State Department of Labor (NYSDOL). The determination will explain why your claim was denied and provide information on the appeals process.

Common reasons why unemployment claims are denied include:

1. Voluntary quit and discharge:

You may be disqualified from receiving Unemployment Insurance benefits if we determine that:

  • You quit a job without good cause, or
  • You were discharged (fired) for misconduct

A disqualification for these reasons lasts until you work again and earn at least ten times the benefit rate we calculated when you filed your claim. Earnings from self-employment will not count. Once you have earned enough from employment to end the disqualification, you must also be out of work again through no fault of your own. If you left your job for good cause, you will not be disqualified from receiving Unemployment Insurance benefits.

Examples of good causes include:

  • A domestic violence situation where your safety, or the safety of your immediate family, would be at risk if you stayed in the job
  • If a member of your immediate family has an illness or disability that requires you to take care of them for longer than your employer is willing to grant time off (paid or unpaid)
  • If your spouse’s employment location changes and you must move with them to a place where you cannot easily commute to your job
  • The Department of Labor determines that your pay and/or hours of work were reduced substantially

2. Job refusal:

You can also be disqualified from receiving Unemployment Insurance benefits if, after applying, you refuse to take a job that meets the qualifications:

Examples of good causes include:

  • The job would interfere with your right to join or retain membership in a labor organization, or interfere with or violate a collective bargaining agreement
  • There is a strike, lockout, or another industrial controversy in the establishment where the employment is offered
  • The employment is an unreasonable distance from your residence or travel to and from the employment is substantially more expensive than that required in your former employment
  • The wages, compensation, hours, or conditions are substantially less favorable than those prevailing for similar work in the locality or are such that they depress wages or working conditions
  • You customarily worked part-time in the 18 months before you filed your claim, and the offer of employment is not comparable to your part-time work

3. Strike and another industrial controversy, except lockouts:

If you lose your job due to a labor dispute, such as a strike, you may be eligible for Unemployment Insurance benefits. Normally, the strike must last for 14 days before you are eligible to receive benefits. This is called a suspension period. The suspension period does not apply if you are locked out of your workplace due to a labor dispute. You may be eligible sooner if:

  • The labor dispute ends and you are still unemployed, or
  • Your employer hires permanent replacement workers

4. Availability, capability, and word search. You will be denied benefits if you are:

  • Not ready, willing, and able to work
  • Not prepared to take a job immediately
  • Not physically or mentally capable of employment
  • Not actively seeking work and keeping a record of your work search activities (online or written) for

each week that you claim benefits

If you are not eligible for benefits because you are not available for or capable of work, you

can become eligible when you show the Department of Labor that you are again available for

employment, capable of working and actively seeking work, and keeping a record of your work

search activities. You must attend required appointments at your local Career Center. If you do not go to your required appointment, your benefits will be stopped immediately. The first thing you need to do is immediately go, in person, to the New York State Career Center listed on your appointment notice during their business hours of 8:30 a.m. to 4:30 p.m. Monday through Friday.

5. Criminal acts:

You will be disqualified from receiving benefits for 12 months after you lose employment, whether you quit or are fired, if you:

  • Lost your job for committing a felony in connection with your employment, AND
  • You admitted guilt in a signed statement or were convicted of the felony In addition, wages paid to you for employment that ended in criminal acts cannot be used to establish a claim.

6. Incarceration:

If you are in jail or prison, you are not available to accept work immediately. Therefore, you are not eligible for Unemployment Insurance benefits. Also, it is against the law for you to allow or direct anyone else to claim weekly benefits for you while you are incarcerated. There may be other, less common circumstances that can prevent you from being eligible for Unemployment Insurance benefits.


Now, after reading this article you must be familiar with unemployment insurance and how it works. Unemployment benefits have enabled people to find their footing after they have been terminated. In just October 2021, 2.7 billion U.S. dollars were paid out in unemployment benefits in the United States. Notably, the department of labor has allowed people to avail themselves of a second chance in their life and ensured that they don’t fall prey to poverty.

Sandra Johnson

Sandra Johnson

Sandra Johnson was a few years out of school and took a job as a life insurance agent in California, selling coverage door-to-door for Prudential. The experience taught her about the technical components of insurance and its benefits for individuals and society, as well as the misunderstandings people often have about insurance. She has over ten years’ experience in the insurance industry, having worked as both a Broker and Underwriter, assisting clients across a broad range of industries. At Insurance Noon, Sarah diligently gathers all the required information and curates up pieces to provide meaningful insurance solutions. Her personal value proposition is to demonstrate a genuine interest in always adding value for clients.Her determined approach to guiding clients has turned her into a platinum adviser to multiple insurers.