Unemployment insurance is a joint federal-state program that provides temporary benefit payments to employees who are out of work through no fault of their own, until they can find another job. These days, finding another job is no small feat: Many workers have found themselves out of work for up to a year or more. In recognition of these tough economic times, the federal government has passed a number of extensions that make unemployment benefits available for a longer period of time.
Unemployment benefits are intended to partially replace lost wages, so the precise amount you receive will depend on what you used to earn. States use different formulae to calculate benefit payments, but all states take prior earnings into account in some way. Some states consider the employee's prior annual earnings, others look at the employee's earnings during the highest paid quarter or two quarters of the base period. (For more on the base period, see Nolo's article Unemployment Compensation: Understanding the Base Period.)
All states also set an upper limit on the total weekly benefit amount. A common formula is to pay half of what the employee used to earn, up to a cap that's tied to the average earnings in that state. This means that employees with higher wages may receive a larger overall benefits check, but a smaller percentage of what they used to earn. The maximum amount an employee can receive each week varies widely from state to state.
Some states provide an additional benefit amount to employees with dependents. These amounts tend to be small; most states that provide this benefit offer $25 or less per dependent per week in additional benefits.
Unemployment benefits are taxable. (Although the first $2,400 in unemployment benefits was not subject to federal income tax in 2009, that provision was not renewed for subsequent years.) You may elect to have up to 10% of your benefit amount withheld to pay federal income taxes.
If you earn other income while receiving unemployment, that may reduce the amount of benefits available to you. Of course, if you find a new job, you will no longer be eligible for unemployment. But if, for example, you pick up temporary work for a day or two while you are otherwise unemployed, you must report your earnings to the state unemployment agency, which will determine whether your unemployment benefits should be reduced to reflect those earnings.
If you are found eligible for unemployment benefits, the notice you receive from the state unemployment insurance department may indicate how much you can expect to receive per week. If not -- or to learn more about your state's benefit amounts -- contact your state's department. You can find links and contact information for every state's unemployment agency at www.servicelocator.org/OWSLinks.asp, the Career One Stop site sponsored by the federal Department of Labor's Employment and Training Administration.
Duration of Benefits
In a normal economic climate, most states offer unemployment benefits for up to 26 weeks, or half a year, although a handful of states now offer benefits for fewer weeks. In these anything-but-normal times, however, the total period for which a former employee can receive benefits has been lengthened several times, through two separate programs. Depending on when and where the employee began collecting unemployment, an employee might be entitled to collect benefits for a longer period of time. Here's a closer look at extension programs that might affect your unemployment payments.
Emergency Unemployment Compensation Program. Emergency Unemployment Compensation (EUC) is a federal program that provides for additional periods of benefits once an employee's regular state eligibility period has expired. EUC was initially passed in 2008, but has been extended and amended several times since then to provide a continuing safety net for the significant number of workers who have joined the ranks of the long-term unemployed.
EUC is currently available in four "tiers," each representing an extension of the usual period during which former employees can earn benefits. A worker must exhaust available state benefits before receiving EUC and must exhaust each tier, in order, before moving to the next.
- Tier 1 provides up to 14 additional weeks of benefits until September 2012, and 14 weeks therafter.
- Tier 2 provides up to 14 additional weeks of benefits, in states with at least 6% unemployment.
- Tier 3 provides up to nine additional weeks of benefits, in states with at least 7% unemployment.
- Tier 4 provides up to ten additional weeks of benefits, in states with at least 9% unemployment.
Extended Benefits. Extended benefits are a joint federal-state program. Extended benefits provide 13 to 20 weeks of additional unemployment compensation to former employees who have exhausted their available state benefits. This is a separate program from EUC. Extended benefits are based on the unemployment rate. Currently, no states qualify for extended benefits, because their rates do not exceed the threshold.
It's a work in progress. As you've no doubt heard or read in the news, Congress frequently debates these extension programs, which are set to expire periodically and must be renewed or amended to remain in force. To find out the current state of affairs, visit the federal Department of Labor's website, www.dol.gov, and select "Unemployment Insurance" to get to the home page for unemployment. To find out more about the benefits available through your state when you apply, contact your state unemployment insurance agency. You can find links and contact information for every state's unemployment agency at www.servicelocator.org/OWSLinks.asp, the Career One Stop site sponsored by the federal Department of Labor's Employment and Training Administration.