How Does Unemployment Work?

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Unemployment Benefits Give You Funds When Between Jobs

Changing jobs can be one of the most stressful times in a person's life, especially when it's not your choice. If you qualify, you can receive unemployment benefits when you are between jobs and looking for another job. These payments help you to pay your normal monthly bills, such as rent and daycare for your children, until you secure another job. Receiving these benefits can be a real lifesaver and reduce your stress level while searching for a new job.

How Does Unemployment Work?

Federal and state unemployment programs work together to supply eligible employees with benefits when they lose their jobs. The money is paid into the IRS by employers and then distributed to employees when they are out of work through no fault of their own. Unemployment benefits are complex, and you need a thorough understanding of the rules to know if you qualify.

Who Pays the Unemployment Benefits?

Basically, your employer is responsible for submitting the unemployment insurance payments to the IRS. These funds are distributed to qualified people when they are out of work. Employers pay federal and state taxes at a rate assigned to them annually based on the total amount they have paid on the taxable wages of all employees. Three states—New Jersey, Pennsylvania and Alaska—require a percentage of an employee’s salary deducted to pay a portion of unemployment insurance. Most states require that employers report to the IRS quarterly and annually.

How Much Do You Get for Unemployment?

Some states have an online tool for calculating your unemployment benefits. The amount is based on several variables, including how much money you make, how long you’ve worked at a job and the specific state rate where you live. Each state also has a maximum benefit amount that it pays for benefits. Your benefits are based on a percentage of your earnings over a recent work period of 52 weeks.

Each state also has a maximum number of weeks that you can collect unemployment benefits. According to the U.S. Department of Labor, most states have a maximum benefit period of 26 weeks. During times when unemployment rates are high, some states extend benefits to unemployed people for additional weeks.

For a better idea of how much you can get in benefits, visit your state unemployment office’s website and look for a benefits calculator.

Do You Pay Taxes on Unemployment Benefits?

Unemployment compensation is considered income by the IRS. As such, you do have to pay taxes on the amount of money you receive. You can do so when you file your annual taxes, or you might choose to have the taxes withheld from your benefits payments so you don't have to make a large payment at year-end.

What Qualifies You for Unemployment?

You must be completely out of work through no fault of your own to collect benefits. This means you can’t quit a job and then collect compensation. You must also have earned enough and worked the amount of time previous to losing your job as per your state's requirements. The amount of time is a base period that is usually calculated for a recent 52-week period. You also have to meet other eligibility requirements of your state law, such as being ready to work and actively looking for work. You might need to sign up with an organization to help you find work.

Why Would I Be Disqualified for Unemployment?

You can be disqualified if your reason for leaving your job is something other than a lack of work. Your local benefits office will make this determination, with input from your employer on the reason you are no longer employed. Any other qualifications that you don’t meet according to your state's specific laws can disqualify you from compensation.

How Much Money Can You Make and Still Collect Unemployment?

You might be eligible to receive partial benefits if you lose your job, meet all the requirements for benefits and replace your job with a part-time job. This can be helpful in your job search, as you can learn skills for a new career part-time while still looking for full-time work. It might result in you getting more money in your pocket as a combination of a part-time job and partial benefits. In some cases, partial benefits can also extend your overall benefits period and allow you to qualify for a new claim at the end of your original benefit period. Check with your state's unemployment office to find out exactly how much you can make and still receive partial benefits.

How Much Can You Get for Unemployment in California?

The California Employment Development Department calculates your weekly unemployment benefit by multiplying your highest quarter of wages in your base period by 26. The maximum benefit you can receive is $450 per week for a maximum period of 26 weeks.

How Much Can You Get for Unemployment in Texas?

The Texas Workforce Commission calculates your weekly benefits by multiplying your highest quarter of wages in your base period by 25. The maximum weekly payment is $465 per week for a maximum period of 26 weeks.