Unemployment insurance is our backstop for when people lose their jobs through no fault of their own. As the Covid-19 crisis has shown us, you don’t have to be a bad employee or not show up to work to no longer have a job, many of our friends and family members have been affected by workplace closures before, but none of us have ever seen anything like the number of industries that have been immediately affected this month. Casinos are closed for the first time ever!
Unemployment is designed to help people keep paying their bills while they look for a new job. Typically, to be eligible for unemployment you must have been separated from your job through no fault of your own, such as laid off. If you are fired because of your actions, such as not showing up to work, or not showing up on time after several warnings and you are fired, then you are not eligible for benefits. If you quit your job you are not eligible for unemployment. If you are self employed you are not usually eligible for unemployment, but with Coronavirus Stimulus Bill, self-employed people are now eligible as out people who are sick, or have family member who is sick, and they need to provide care for them.
While receiving unemployment benefits there is typically a requirement that you be actively looking for a new job to maintain eligibility. Any amounts you earn will reduce the amount you receive from unemployment, but they can also extend your eligibility period. Think of benefits as a potential total amount of dollars versus just time.
People who are still being paid, whether through sick leave benefits or paid leave are not eligible.
How Unemployment Benefits Work:
Each State has its own unemployment fund and there are particular rules for each state. Overall, the amount of unemployment you can receive is typically a percentage of your income with a maximum amount. For example, in Colorado, anyone eligible for unemployment can receive 60% of their prior wages up to $484/week for 26 weeks (some states the payment period is as low as 12 weeks).
The Coronavirus stimulus bill will increase the weekly amount by $600/week for a potential total of $1,084 per week for 4 months. It also extends the duration of total benefits by an additional 13 weeks.
If you are unemployed in Colorado and eligible for the maximum benefit of $484/week, your payouts, including the new Coronavirus stimulus would look like this:
Week 1 through Week 16: $1,084/week
Week 17 to Week 39: $484/week
Total Amount of Benefits: $28, 476 paid over 39 weeks.
If you were unemployed before the coronavirus and are on unemployment or have used your employment benefits you may be eligible for the additional 13 weeks and the additional $600/week. You may also be eligible for pandemic unemployment insurance.
Unemployment for the Self-Employed:
The CARES act has specifically included self employed people and made them eligible for unemployment benefits that are equal to the same state benefits that an employee laid off from work would receive.
This includes the additional $600/week benefit for 4 months.
Be Patient with your State Unemployment Office:
They have to process an unprecedented amount of claims to process as well as figure out how the new law will be applied. Realize the people that work there have their same job, but with 10 times the amount of work to do. Be polite, do not take it personally if your call gets disconnected or there is a problem with your claim.
Typically, when a person files for unemployment their status is confirmed by their previous employer. This could take longer than usual with many businesses closed or the correct people unavailable because of Shelter-in-Place orders.
Self-employed people who are applying for unemployment – be patient. Your state has to figure out how to allow you to apply as well as adjust their system from the additional $600/week that is available to everyone on unemployment. This will take some time and remember, many of these state offices has personnel shortages as they deal with work from home and illnesses to workers or their family members.
How is the State Unemployment Funded:
Unemployment insurance is paid by employers. In essence, it is the rainy-day fund for employees that is funded by employers in case employers no longer have a job for an employee. This could be due to the business moving, closing, or having less work. Each year, employers pay a percentage of payroll for each employee into the State unemployment fund. Individual company rates are based on their use of the program and the amount of use by all employers. Just like your car insurance rates are based on your driving record as well as all of the payouts from the insurance company.
Dan’s Construction company has been hiring for the past 5 years and in 2019 had 30 employees. But in December of 2019, they lost a project and were forced to lay off 5 employees. During the years Dan’s Construction was doing well, it paid in premiums that were never used. Now those premiums will go to pay the laid off employees.
Like all insurance, the premiums from some companies will go to cover the costs of others. If Dan’s Construction goes of out business, then all the other employers will pay slightly higher premiums to pay for the lost wages of Dan’s Construction employees as the claim costs will be more than all the premiums paid. The system hopes that many of the laid off employees will find another job so that the insurance system does not have to keep paying them.
When the State Unemployment fund runs out of money do they stop paying benefits? No, they borrow the money from the Federal Government and the loan is repaid, by current employers, in the years to come. So, losses today increase costs for businesses tomorrow, and those increased costs slow growth and expansion as businesses will also have higher costs for their current employees insurance.
I’m also open to answering your questions via email! Hit me up at dave@keepyours.org.
Watch our video on this here: