Unemployment Insurance Benefits

Unemployed people are more likely to face a variety of difficulties, such as trouble obtaining new work and lower-income. Many persons who have lost their jobs benefit from the federal-state unemployment insurance system (UI), which pays a portion of their salaries while they hunt for work.

Unemployed people are more likely to face a variety of difficulties, such as trouble obtaining new work and lower-income. Many persons who have lost their jobs benefit from the federal-state unemployment insurance system (UI), which pays a portion of their salaries while they hunt for work.

Unemployment insurance benefits are meant to offer temporary financial help to jobless workers who are unable to work due to circumstances beyond their control. Each state has its own set of rules for eligibility, benefit levels, and the length of time that benefits can be provided.

During the coronavirus outbreak, the federal government put in place procedures to assist jobless Americans. After President Donald Trump signed the Coronavirus Aid, Relief, and Economic Security (CARES) Act in March 2020, these additional benefits became effective. They were extended after the Consolidated Appropriations Act of 2021 was passed, and they were extended again on March 11, 2021, when President Joe Biden signed the $1.9 trillion American Rescue Plan Act of 2021. The extra benefits were set to expire on September 6, 2021.

Unemployment insurance definition

Unemployment insurance (UI), commonly known as unemployment benefits, is a sort of state-funded insurance that pays out money on a weekly basis to those who have lost their jobs and satisfy specific criteria. Those who resigned from their jobs or were dismissed for a good reason are not eligible for unemployment insurance benefits. To put it another way, someone who is laid off due to a lack of suitable labor and is not at fault frequently qualifies for unemployment benefits.

Despite the fact that unemployment insurance benefits are a federal statute, each state manages its own program. Workers must comply with all labor and wage criteria set out by their state, including time worked. State governments are largely responsible for disbursing the benefits, which are supported by payroll taxes collected specifically for that purpose.

How does unemployment insurance work?

Individual state governments and the federal government collaborate on the unemployment initiative. Unemployment insurance pays cash stipends to jobless people who are actively looking for jobs. The Federal Unemployment Tax Act (FUTA) and state employment agencies provide compensation to qualifying jobless employees.

Although each state has its own unemployment insurance scheme, all states are required by federal law to follow certain principles. Unemployment benefits are quite common across state boundaries according to federal law. The program is overseen by the US Department of Labor, which guarantees compliance in each state.

Workers who satisfy certain criteria may be eligible for up to 26 weeks of benefits each year. The weekly cash stipend is intended to replace, on average, a portion of the employee’s usual income. Employer taxes are used to support unemployment insurance in most states. The majority of employers will pay the FUTA tax on both the federal and state level. 501(c)3 organizations are exempt from the FUTA tax.

Employee contributions to the state unemployment fund are also required in three states.  Unemployment insurance beneficiaries’ reportable income includes freelance work and jobs for which they were paid in cash.

People who have been unemployed for more than 26 weeks may be eligible for an extended benefits program. Unemployed individuals might get an additional number of weeks of unemployment benefits if they qualify for extended benefits. The availability of extended benefits will be determined by the general unemployment situation in a state. 8 If you’ve lost your job as a result of the coronavirus outbreak, examine the list of available programmes below.

The federal-state unemployment insurance (UI) program, as it was organized before to COVID-19, was established in 1935 to temporarily replace a part of pay for employees who have been laid off while they are seeking a job. Although payments vary by state, the program typically gives up to 26 weeks of benefits to jobless employees and restores 30 percent to 50 percent of a worker’s former income in most states. Because more employees lose their employment during recessions, this program also offers much-needed economic stimulation, which helps to lessen the severity of recessions.

The structure and goals of the unemployment insurance system

UI is a federal-state partnership that allows for a lot of state freedom. “The States shall have considerable discretion to build up the form of unemployment compensation they choose,” asserted Franklin D. Roosevelt’s Committee on Economic Security, which established the fundamental framework for what would become the Social Security Act.

Federal standards for state unemployment insurance systems are limited, with the goal of ensuring that UI offers a basic degree of protection for qualified employees while also acting as a macroeconomic stabilizer in times of economic instability. Unemployment compensation is defined by federal law as “cash benefits provided to persons with relation to their unemployment” and lays out a few fundamental standards, the most important of which are:

  • All money withdrawn from the State’s unemployment fund should be utilized only for the payment of unemployment compensation”
  • states cannot impose unduly difficult “methods of administration” that prevent otherwise qualified people from receiving benefits.

These standards guarantee that states retain programs that provide a minimal degree of protection to individuals who have a sufficient work history and are laid off due to no fault of their own. States are allowed to set and change employer tax rates, benefit amounts and durations, and eligibility requirements, such as the length and duration of past employment required to qualify for benefits, within these basic safeguards.

Unemployment benefits USA

Even if they live in a different state, workers receive unemployment benefits from the state where they worked. When a person applies for benefits — usually over the phone or online — the state evaluates whether the individual is qualified and the amount of benefits he or she is entitled to. The benefits supplied to each individual will differ in two ways: the number of weeks they will last and the amount of money they will get each week.

Weeks in a year While some states simply give all unemployed workers the same number of weeks of benefits, most states vary the number of weeks based on the amount of a worker’s past earnings, whether the worker had earnings in each of the four calendar quarters that make up the base period, and how evenly those earnings were distributed over the base period.

Workers in most states are entitled to a maximum of 26 weeks of unemployment benefits,[9] though many UI claimants are only eligible for a fraction of that time due to unequal earnings or short work history. In normal economic circumstances, most employees find new employment before exhausting their maximum number of weeks available; before the recession began in December 2007, the average length of time UI beneficiaries received benefits was 15 weeks.

Amount in dollars. The average weekly unemployment benefit is a bit over $300. Individual benefit amounts, on the other hand, vary significantly depending on the state and the worker’s past wages. Furthermore, in certain states, workers with dependents earn larger benefits.

Up to a maximum benefit amount, state regulations normally attempt to restore around half of a worker’s past wages. In 2014, the highest state-provided benefit ranged from $133 in Puerto Rico to $235 in Mississippi (the lowest for a state) to $679 in Massachusetts ($1,019 with dependents). [11] UI benefits replace a smaller percentage of past earnings for higher-wage workers than for lower-wage individuals since the benefit is restricted. The average UI recipient nationally received a benefit that replaced 46.6 percent of his or her wages in 2013, the most recent year for which data are available, although that “replacement ratio” varied from 33.9 percent in Alaska to 54.3 percent in Hawaii.

Additional benefits during economic downturns

Three types of programs can presumably offer extra weeks of benefits to workers in states where unemployment has risen sharply:

  • temporary federal programs established by Congress primarily during national economic downturns;
  • the permanent federal-state Extended Benefits (EB) program, which is available to hard-hit states even when the national economy is performing well;
  • additional temporary or permanent programs established by states sporadically. The amount of additional benefits received by an individual is usually the same as his or her normal state benefits, and the duration is determined by the length of those regular benefits.

Federal benefits in case of temporary emergency

Historically, when unemployment is high during recessions and early stages of recovery, the federal government has financed additional weeks of emergency benefits for employees who have exhausted their normal state-provided UI payments. The Emergency Unemployment Compensation (EUC) program was created in reaction to the recent Great Recession. EUC offered emergency federal compensation for up to 34 weeks in all states and up to 53 weeks in states with unemployment rates of 8.5 percent or greater at its height.

With long-term unemployment reaching record highs in the aftermath of the Great Recession, lawmakers repeatedly extended the program past its original expiry date. They did, however, restrict the maximum number of weeks available in February 201 and subsequently, the program was allowed to expire entirely at the end of 2013. (Attempts to resurrect the program in 2014 failed.)

Extended benefits program which is permanent

The EB program was established by Congress in 1970 to offer additional weeks of benefits to employees in high-unemployment states who had completed their normal, state-provided unemployment benefits. In most cases, the federal government and the states divide the expense of EB 50-50. However, with the passage of the Recovery Act in February 2009, the federal government began to completely support the program on a temporary basis. In 2014, states reclaimed responsibility for their part of the money.

When the insured unemployment rate (IUR)— the number of UI recipients as a percentage of the total number of people working in jobs where they would potentially be eligible for UI— reaches at least 5% and is at least 20% higher than it was during the same period the previous two years, the state must provide up to 13 weeks of EB.

Optional triggers based on the total unemployment rate (TUR) – the number of jobless persons as a proportion of the entire labor force — can also be adopted by states (both employed and unemployed). [19] States can grant up to 13 or 20 weeks of EB under these optional triggers if the TUR meets specific criteria (see Table 1) and is at least 10% higher than the same time in the previous two years. The optional triggers are more likely than the IUR trigger to activate EB, and many states who didn’t have them before acquired them to take advantage of Recovery Act money.

The EB program’s “look back” provision, which requires that a state’s unemployment rate not only exceed certain thresholds but also be significantly higher than in previous years, did not anticipate a recession in which large numbers of states would experience as long a period of very high unemployment as the Great Recession did. Faced with a prolonged economic downturn, Congress gave states the option of implementing a three-year “look back” period in 2010, which several adopted. Although most states have not met even the look-back criteria since 2012, this rule remained in place until the end of 2013.

Prior to 2012, states with high unemployment rates that used the optional EB triggers may only get 99 weeks of unemployment benefits (26 weeks of regular, 53 weeks of EUC, and 20 weeks of EB). In 2013, that amount was reduced to 73 weeks (26 weeks of normal UI and 47 weeks of EUC, and only in a few states with unemployment of at least 9%) for all practical purposes.

Programs by state

Prior to 2012, states with high unemployment rates that used the optional EB triggers may only get 99 weeks of unemployment benefits (26 weeks of regular, 53 weeks of EUC, and 20 weeks of EB). In 2013, that amount was reduced to 73 weeks (26 weeks of normal UI and 47 weeks of EUC, and only in a few states with unemployment of at least 9%) for all practical purposes.

Sharing of Work

Workers who lose their jobs due to no fault of their own are eligible for unemployment insurance (UI). By allowing employers to set up suitable arrangements in which employers reduce the hours of a larger number of workers, who can then apply for UI to replace some of their lost earnings, an alternative approach known as work-sharing or short-time compensation avoids layoffs and the potential for temporary unemployment spells to turn into long-term unemployment. Work sharing appears to have kept unemployment down in Germany during the Great Recession, and work-sharing legislation in the United States was expanded in 2012. [21] Work sharing has struggled to gain widespread acceptance in the United States, despite its appeal as a means of reducing layoffs and long-term unemployment.

Who Is Eligible for Unemployment Insurance?

To be eligible for unemployment benefits, a person must:

  • be “able to work, available to work, and actively seeking work;
  • having lost a job by no fault of his or her own;
  • Prior to being jobless, you must have earned at least a specified amount of money during a “basis period.”

States use these broad requirements in a variety of ways. Some states, for example, only cover part-time workers if they are willing to work full-time, while others enable them to qualify even if they are looking for another part-time employment. In addition, governments have some control over the employment time utilized to establish eligibility.

Except during recessions, fewer than half of unemployed employees have received unemployment benefits since the late 1950s.To be clear, unemployment insurance isn’t meant to cover everyone who is jobless; it excludes those who willingly quit a job, persons seeking their first job, and re-entrants who previously left the labor field voluntarily. However, the rising number of jobless individuals who fit the fundamental requirements outlined above but do not meet their state’s eligibility rules — which were created decades ago (in a totally different labor market) — has made it more difficult for UI to carry out its mandate.

To address these issues, President Clinton and legislative leaders formed a bipartisan Advisory Council on Unemployment Compensation in 1994. [8] The group found a number of severe flaws in UI eligibility and other criteria and proposed a number of changes. While several states implemented some of the measures, the federal government did not take the proposals seriously until recently. The 2009 Recovery Act made $7 billion available to states that upgraded their unemployment insurance laws to increase eligibility, with 38 states, plus Washington, D.C., Puerto Rico, and the US Virgin Islands, receiving federal cash.

How Is Unemployment Insurance Funded?

Unemployment insurance taxes

Employers pay taxes on behalf of their employees to fund the basic UI system. While businesses are theoretically responsible for both federal and state taxes, economists generally consider the tax to fall on employees because the money paid in taxes by employers would otherwise go into workers’ salaries.

Employer taxes are levied by states to fund regular unemployment insurance payouts for unemployed workers (the federal government typically picks up the full tab for temporary emergency UI benefit programs such as EUC). The Federal Unemployment Tax Act (FUTA) imposes a UI tax on employers to fund the operation of state unemployment insurance programs. This tax also funds the account that has been used to pay for extra weeks of benefits in most recessions as well as the fund from which states can borrow to pay regular state UI benefits when necessary.

The federal tax is 0.6 percent of the first $7,000 paid to each employee each year. Because most workers earn more than $7,000 per year, this tax is regressive; they effectively pay the same flat tax of $42 per year regardless of income. FUTA taxes thus account for a substantially smaller portion of high-wage workers’ wages than low-wage workers’ wages.

If the federal trust fund balances rise to a certain level in better economic times, the law mandates that extra transfers to the states be made automatically.

These “Reed Act” payouts (called after the 1954 law that established the provision) are made directly to state unemployment trust funds. States are not compelled to use this money for anything other than unemployment insurance, and they are not required to use it to improve or extend UI benefits.

The state unemployment insurance tax is charged on an initial dollar amount of each employee’s earnings, known as the taxable wage base. A state’s taxable pay base must be at least $7,000 per employee. This minimum taxable base is set by law to be the same as the federal UI tax’s taxable wage base, and it has not been increased since 1983. In 2012, the state’s median taxable wage base was $12,000.

The taxable wage base and the tax rate determine the amount of tax paid by an employer per employee. The tax rate that each firm pays is decided by its “experience rating,” which is based on the employer’s history of laying off workers who then obtain unemployment benefits. Businesses with greater layoff rates pay a higher unemployment insurance levy and, as a result, contribute more to the program that helps these people than businesses with lower layoff rates.

Problems of Solvency

Unemployment insurance in the United States was created with the intention of being “forward financed.” In that instance, during periods of good economic development, states are expected to impose taxes on businesses to build up balances in their unemployment insurance trust funds, which are subsequently used to compensate jobless employees during local or national economic downturns and recessions. When recessions strike, forward financing guarantees that unemployment benefits continue to support laid-off employees and their families, whose spending, in turn, helps the economy when consumer demand is low.

Rather than investing in their programs ahead of time, several states used a “pay-as-you-go” strategy, keeping taxes artificially low when the economy was booming rather than planning for a downturn by establishing trust fund reserves.

Despite the fact that it had been more than a decade since a bipartisan advisory group advised states to revert to forward funding in 1994, several states maintained their unemployment insurance levies artificially low and, by 2008, had even decreased their UI tax rates to historically low levels.

As a result, many states’ unemployment insurance trust funds were unprepared for the Great Recession, and most states had to borrow money from the federal government to pay payments. Because unemployment is predicted to stay high for some time, this type of borrowing will almost certainly continue in the coming years.

States must repay the loans in full, plus interest, within two years after receiving the cash. If a state does not repay the entire amount, the federal government will collect its funds by raising the federal tax on state employers each year until the loan is repaid. As a result, for the 2014 tax year, employers in 11 states and the Virgin Islands will pay increased FUTA tax rates.

How Do I File for Unemployment Insurance?

Unemployment insurance benefits are provided by the United States Department of Labor to qualified workers who become jobless due to no fault of their own and fulfill certain additional criteria.

Unemployment insurance is a state-federal program that pays financial compensation to people who are unemployed. Although each state manages its own unemployment insurance program, all states adhere to the same federal criteria.

Each state determines who is eligible for unemployment benefits, although you are normally eligible if you meet the following criteria:

Eligibility criteria

  • You are jobless due to no fault of your own. In most states, this implies that you had to leave your previous position owing to a lack of accessible jobs.
  • Comply with all labor and wage standards. You must fulfill the standards of your state for money received or time worked over a set period of time known as a “base period.” (This is generally the first four out of the past five full calendar quarters before your claim is submitted in most states.)
  • Comply with any extra regulations imposed by the state. Find out more about your state’s program.

Application procedure

You must make a claim with the unemployment insurance program in the state where you worked in order to collect unemployment benefits. Claims can be submitted in person, over the phone, or online, depending on the state.

  • After being unemployed, you should contact your state’s unemployment insurance program as soon as feasible.
  • In most cases, your claim should be filed with the state where you worked. If you worked in a state other than where you now reside, or if you worked in numerous states, the state unemployment insurance agency where you now live can help you make a claim in other states.
  • When you make a claim, you’ll be asked for details like your previous employer’s address and dates of work. Make sure you provide comprehensive and accurate information to avoid having your claim delayed.

How do I stay eligible?

  • Weekly or biweekly claims should be filed by mail or phone.
  • Each week you claim benefits, you must be able to work, available to work, and actively seeking a job.
  • Any profits from work you did during the week should be reported (s). The amount of money you can earn while receiving benefits varies by state.
  • If prompted, report to your local UI claims office or American Job Center on the appointed day and time to report any job offers or job offers you refuse throughout the week. Those who do not attend may have their benefits revoked.
  • Some states need you to register with the State Employment Service in order for it to help you find a job.
  • Meet any additional qualifying conditions set out by the state.

Your local American Employment Center can assist you with your job hunt. They provide a wide range of free services. There are a number of things that employees can do:

  • Job postings in your region, or in other locations if you want to migrate, will be recommended to you.
  • Help with resume writing, interview preparation, and other aspects of the job hunt, as well as referrals to training programs. Some centers provide testing and counseling to assist you in pursuing new employment opportunities.
  • They can recommend you to other agencies for aid if you feel you have special requirements or concerns, such as physical needs or other factors, that may prohibit you from acquiring a job.

What changes have been proposed for UI post-pandemic?

Several ideas to modify the UI system have been made in recent years. Proposals include the following:

  • Make automatic UI expansion during recessions, avoiding the delays that might occur when congressional action is required.
  • To make UI more egalitarian and manageable, make it a nationally-funded and administered program.
  • To eliminate UI discrepancies among states and enhance UI recipiency rates, set a six-month minimum for unemployment benefits and cover part-time workers.


Unemployment insurance continues to offer a vital cushion against income losses due to temporary unemployment more than 70 years after its start. It also acts as an automatic stabilizer for the wider economy by bolstering employees’ spending power during downturns.

Charles Bains

Charles Bains

Charles Bains started his insurance career as a marketing intern before pounding the pavement as a commercial lines agent in Orlando, FL. As an industry journalist, his articles have appeared in a variety of trade publications. His insurance television career, short-lived but glorious, once saw him serve as the expert adviser on an insurance-themed infomercial (yes, you read that correctly). Having recently worked for various organizations, coupled with his broader insurance knowledge, Charles is able to understand our client’s needs and guide them accordingly. He is a gem for Insurance Noon as his wide area of expertise and experience have been beneficial in conducting further researches to come up with solutions and writing them in a manner which is easy for everyone including beginners to comprehend.