It's never easy to stare unemployment in the face, but if you qualify, unemployment benefits can make lean times a bit less stressful.
Today's unemployment rate has leveled off after peaking to 10% in late 2009, but we still witnessed massive layoffs in 2012, and troubled companies are continuing to slash their payrolls. Nationwide, almost 128,000 workers were laid off in March 2013, according to the most recent data from the Bureau of Labor Statistics.
Despite the number of people out of jobs, many of those who qualify for unemployment benefits don't cash in.
A study by the St. Louis Federal Reserve Bank found that in the height of the recession in 2008 and 2009, only half of eligible people applied for unemployment. That figure eventually surged to 95% the following two years, but in total, about 200,000 people still missed out on unemployment benefits to which they were entitled.
So how do you know if you qualify for unemployment?
LearnVest Planning Services certified financial planner™ Rachel Sanborn gave us the scoop.
Are You Eligible for Unemployment?
According to the Department of Labor, you need to meet two criteria to qualify for unemployment:
You are unemployed through no fault of your own: That means you are out of a job due to reasons beyond your control, like a layoff. So, if you quit your job or are fired for gross misconduct, you're not eligible. "Gross misconduct" is a vague term, but generally refers to illegal or dangerous acts committed in the workplace, like stealing from your employer.
You meet your state's requirements for time worked or wages earned: Every state has different rules. For example, New York State requires you to have worked in at least two calendar quarters of your "base period" (generally that just means the year before), be paid at least $1,600 in wages in one of those quarters and during that period made a total of at least 1.5 times the amount you made in your highest-paid quarter that year. Complicated, right? Fear not: If you had a solid, long-term job that you lost, you probably meet your state's minimum time and wage requirements. You can find your state's rules here.
You also need to be actively looking for a new job, so those who head back to school full time won’t be able to collect because they’re no longer actively job-searching. Nonetheless, if you're seeking training in a high-demand field, some states (like Washington and Oregon) have allowances that let you receive additional weeks of unemployment benefits without looking for work, as long as you're enrolled and making satisfactory progress in your training program.
One thing to note: Contract laborers don't qualify for unemployment because their employers didn't pay unemployment taxes when they were working.
What to Know When You File for Unemployment
Exact details vary by state. Some states require waiting periods, in which you need to be unemployed for a certain amount of time before you can collect benefits. Often, this is a week, so the second week you claim is the first week you'll get paid for. The maximum benefit you can receive will also vary by state, and so will the formula for how those benefits are calculated. Keep in mind that severance pay or vacation time at the end of your job can delay when you begin receiving benefits.
Regardless, Sanborn says that newly laid-off people should file as soon as possible. "Don't wait until you think you qualify," she says. "It can be such a hassle and such a long, drawn-out process that the sooner you start, the better."
To apply, contact the unemployment insurance agency in your state of residence and/or past employment. If you lived and worked in different states, Sanborn says you can choose which state to draw benefits from, so it’s worth “shopping around.” Depending on the state, you can file a claim online, by phone or in person.
To prevent delays, make sure the details you provide about your former job (dates of employment, company address and so on) are accurate. And if your claim is denied, you have the right to appeal.
Making Sure You Hang On to Those Benefits
While collecting unemployment, you are required to file weekly or biweekly claims detailing your job hunt, job offers, earnings from part-time work and any times you've refused work (and why).
There's no one set path for all unemployed people because requirements vary by state, but there's a good chance you'll have to attend in-person meetings to update the unemployment agency on the progress of your job search. You also might be encouraged to attend training sessions to help you increase your job prospects.
"It's not easy to stay on unemployment," Sanborn says. "You have to go to a lot of in-person meetings and career training sessions on finding a job or updating a resume." If you don't report to your unemployment office for a check-in when you're supposed to, you could lose your benefits. "Usually you have to submit a list of applications and put down the name and phone number in case they check in on it," Sanborn notes. "But the biggest hassle is that you do need to keep going to those meetings."
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While collecting unemployment, keep in mind that your benefits are subject to federal income taxes and you need to report them on your federal tax return. If you want, you can choose to have the tax withheld by your State Unemployment Insurance agency.
Sanborn's Number One Advice for the Newly Unemployed
Her best tip? Look for a part-time job. "Any week that you make enough so you don't need unemployment is an extra week tacked on to the unemployment period you can collect," Sanborn says.
Some states will prorate your unemployment by a percentage (or deduct a certain amount from your unemployment check for every dollar you earn over a set limit), and others will let you earn a certain amount from part-time work as a supplement to your unemployment before they reduce your benefits. If there are weeks when you make too much to collect benefits, you've just earned yourself a safety net of an extra week!