Unemployment Insurance (UI): How It Works, Requirements, and Funding
Candlefocus Editor• Be unemployed or underemployed through no fault of your own • Have worked in the state where you are claiming benefits during the past 18 months • Have earned at least a minimum amount in wages during that period • Be available for and actively looking for full-time work • Be able and willing to work full-time when a job is offered • Meet specific other requirements listed by the state
Funding for unemployment insurance benefits comes from two sources. First, funds are taken from the first federal unemployment tax (FUTA) paid by employers each year. Then, states collect taxes from employers to supplement the federal contribution.
Individuals who qualify for UI benefits receive a percentage of the wages they earned during their highest earning quarter of the “base period.” Base periods differ depending on the state, but usually include the first four of the last five completed quarters. For example, someone who earned $1,000 in their highest earning quarter could potentially qualify for a weekly benefit of $250. Maximum weekly benefit amounts also vary by state.
In order to help those whose unemployment benefits have yet to kick in or have already expired, the CARES Act offered Pandemic Unemployment Assistance, which covered self-employed workers, independent contractors, and those affected by the spread of the virus who don’t have access to traditional unemployment insurance. This program paid benefits for up to 39 weeks for those qualifying for PUA, ending no later than March 14, 2021. Recently, with an extension of the law, this has been increased to April 10.
In addition to these, the CARES Act extended the duration of unemployment insurance to 39 weeks, an increase of 13 weeks, for those unable to find work during the pandemic and provides additional support to those who need it most.
In short, unemployment insurance is a form of short-term, temporary financial assistance that helps individuals and families while they are in between jobs. It is funded by both the federal government and the states and provides a benefit to those that qualify. The CARES Act temporary programs provide additional support to those laid off during the pandemic and help prepare them to re-enter the workforce. To continue to qualify for UI benefits, applicants must continue to meet certain requirements and actively seek out full-time work.