Understanding How Unemployment Insurance Benefits Work for Both Employees and Employers

Having run the administrative end of several small businesses, I learned how to navigate the requirements for unemployment insurance for our employees. It seems to me there are a lot of people who do not understand how unemployment insurance works, and some people even want to equate unemployment benefits with welfare of some sort that is paid to recipients by the government with tax dollars. Hopefully this hub will help clear up some misunderstandings.


People who have many skills have more options when looking for a new job.
People who have many skills have more options when looking for a new job. | Source

How Unemployment Is Determined For Employers

Employers are required to pay into their state’s unemployment program for each of their employees according to the number of hours each employee works and the amount of wages or salary each of their employees earns. Some employers may be exempt from paying into unemployment insurance because of the type of business they operate or because they have very few employees. This varies from one state to another.

It is generally accepted that the wages and salaries of employees will be somewhat lower to offset this expense that is incurred by their employer for their benefit. If unemployment insurance were not paid by their employer, presumably their salaries/wages would be higher. For that reason, unemployment benefits are considered part of an employee’s wages.

Just as some employers pay into health insurance programs so that their employees will have access to healthcare when needed, they also pay into the unemployment insurance program to help their employees get through periods of unemployment. The difference is mainly that employers are required to pay into the unemployment insurance program, where they may have a choice of whether or not to provide health insurance benefits to their employees.

When employers pay into the unemployment program, they NEVER GET THEIR MONEY BACK even if none of their employees ever collects a penny from the program. Generally large employers like Verizon or Wal-Mart pay more into unemployment insurance than small companies, for the obvious reason that they employ more people.

Generally there are no tax dollars going into the unemployment insurance program. The market crash of 2008 changed that temporarily. Normally a person cannot collect unemployment benefits for more than 6 months, but because the economy was, and is so horrible, the federal government (and some state governments) subsidized the unemployment programs of various states so that people who could not find jobs within 6 months would receive benefits for longer than usual. The usual period for collecting benefits for 26 weeks was extended for some people for as many as 99 weeks. Again, this is a temporary measure and is not the case in every single state.

How Does a Person Qualify For Unemployment Benefits?

There are different conditions under which a person can collect unemployment benefits. Not everyone qualifies for unemployment benefits, and some people will receive no benefits even if they lose their job through no fault of their own.

First of all, there must be benefits available to the employee that is laid off. Here in Texas, a laid off employee’s benefits are determined by how many hours and how much pay they earned during the quarter 13 to 15 months prior to the time they are filing to collect benefits.

A quarter, in this situation is a three-month period. There are 12 months in the year, and the year is divided into quarters, or 3-month periods. Jan-March, April-June, July-Sept., and Oct.-Dec.

If you were to apply for unemployment benefits on April 3, 2012, the unemployment commission here in Texas would look back at your work record 1 year and 1 quarter back in time, or Jan-March of 2011. Your benefits would be based on your wages/salary in that quarter from 2011. If you did not work during that quarter, you would receive no benefits. If you were earning only $7.50 an hour for 20 hours a week, your benefit would be based on those earnings even though the job you have just been laid off from was 40+ hours a week at $15.00 an hour.

The benefit an unemployed person usually gets will be approximately one third of what their weekly check was during the quarter in which their benefits are based. In the above example, one third of the pay earned in the quarter Jan-March in 2011 would be the person’s benefit if s/he applied for and qualified for unemployment benefits on April 3, 2012.

Just as there is a minimum wage, so there is usually a minimum unemployment benefit in most states. The minimum unemployment benefit in Texas for qualified recipients is $243.00 a week. It may be more or less in other states.

If you live in a state other than Texas, check with your unemployment, or state employment agency, to see how benefits are determined in your state. There may be some differences.

More Qualifications For Unemployment Benefits

People who are terminated for cause cannot collect unemployment benefits in most states. People who quit their jobs cannot collect unemployment benefits in many states.

Here are the exceptions to those rules:

If an employee becomes physically disabled for some reason, and that prevents them from doing their job, and their employer refuses to make reasonable accommodations for their disability (give them a different job within the company that does not have the same impossible physical requirements, etc.), they may be able to collect unemployment benefits even though they have quit their job.

If an employee is terminated and the state workforce commission determines they were wrongfully terminated, they may be able to collect unemployment benefits.

Every unemployment claim is investigated to determine if an applicant is entitled to collect benefits or not. If it is determined that a person does not qualify for benefits, s/he can file an appeal. That process is explained in the booklet you should receive from your state unemployment commission in the event you file for unemployment benefits and you are denied.

Requirements For Continuing To Receive Unemployment Benefits Once You Qualify

Most states have requirements that a person receiving benefits must meet in order to get those benefits and keep those benefits. In order to know what your requirements are, you should check with your state unemployment commission or agency. This information should be included in the booklet you should receive if you apply for unemployment benefits, and should also be available on your unemployment commission’s website. Requirements may vary somewhat from one applicant to another, so you should receive a letter from your unemployment commission specifying exactly what your requirements are.

Here in Texas, a person receiving unemployment benefits may not turn down any job referral or any job offer unless that referral or job offer is for a job they cannot physically do, or are not qualified for. Also, if the pay is considerably less than they would normally earn, they may turn the job offer, or job referral down.

Here in Texas, after a certain amount of time has passed during which an unemployed person receiving unemployment benefits has not found another job, that unemployment benefit recipient is required to lower his/her wage/salary requirements based on their most recent job, by 20-25%. That means they can lose their benefits if they turn down a job because it does not pay as well as their most previous job. They must reduce their wage/salary expectations or requirements by 20-25% (exactly how much will be specified by their unemployment commission), but not lower than the state minimum wage.

Also, an unemployment beneficiary must make a minimum number of job searches every week. It is important to keep good records on the job searches because the unemployment commission will randomly request proof that these job searches or applications were done. Unemployment benefits can be lost because a person either did not do the job searches, or did not keep satisfactory records to prove they did the job searches. At some point you will be asked for proof of your job searches. It is not a question of if, but when. Be prepared with good records of your job searches.

There is one exception to these requirements. If an employee is laid off temporarily, often times their employer does not want them to search for another job. They want that employee to be available to return to work as soon as there is enough work to keep them busy. If their laid off employees were to search for a job during this slow time for some employers, they just might find a better job and then they would not return to their original employer. In a case like this an employer will inform the unemployment commission that no work searches are desired or required. They want their employees to collect unemployment benefits while work is slow, and they want to assure as much as possible that their employee will return to work when needed.

I have personally experienced this situation when I had a job that was seasonal and that required some special training. My employer was happy to provide unemployment benefits to help me get through those periods when there was no work, and even directly stated to me that they preferred I not search for interim work. They wanted assurance I would return when work resumed.

Remember, employers do not get any money back from the program even if none of their employees ever collect benefits. Unemployment insurance benefits both the employee when they lose their jobs through no fault of their own, and it benefits employers who do not want to lose good skilled employees because of a work slowdown.

Tax dollars do not usually contribute to unemployment insurance. The current situation is unusual and burdensome for many small employers, and that is the reason why the federal government, and in some cases state governments, have stepped in to pick up the slack in keeping unemployment benefits available to people who cannot find jobs.

Mistakes People Make Regarding Unemployment Benefits

The biggest mistakes laid off employees usually make:

1. Not applying for benefits in the first place, even if they quit, or have been fired.

2. Not following scrupulously, the requirements for keeping those benefits flowing, i.e., doing required job searches, or following through on job referrals from the unemployment commission, etc.

The biggest mistakes employers make:

1. Not understanding how the unemployment program works and thinking it is not worth their while to educate themselves about it. Most large employers know their responsibilities and how to make the program work for them. A lot of medium sized and small employers do not.

2. Not returning the inquiry forms their unemployment commission requests from them stipulating the reason for laying off, or terminating an employee, etc.

3. Not showing up for the hearing that may be set regarding a former employee who has filed for unemployment benefits. Just like many lawsuits, if you don’t show, you lose by default.

© 2012 C E Clark

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Comments 168 comments

Au fait profile image

Au fait 2 months ago from North Texas Author


Thank you for your enquiry. I’m sorry to hear about all the problems you are having with your current employer. I would recommend you contact your local state unemployment office and explain your situation to them and pose all of your questions to them. They will be able to give you absolute answers and those are the kind of answers you need so that you know what you must do to resolve this situation of slow paychecks and unsatisfactory employment.

Mondays, especially mornings, are extremely busy at the unemployment office. The wait, whether in person or on the phone, can be very lengthy. Generally afternoons are best for contacting them, and the closer to Friday the better, as everyone has the idea to contact that office first thing Monday morning, or as near to it as possible.

If your paychecks are regularly a week or more late, I would also contact an attorney who specializes in employment law. That attorney specializing in employment law will know if you have a cause of actin against your employer for any reason, and may be able to work out any issues with your employer without court action.

A surprising number of employers, usually small businesses, are uninformed about laws that effect different facets of their business, such as employment law. They make mistakes as a result. Of course it is the responsibility of new business owners to learn what laws effect their businesses so to avoid breaking them.

It is very difficult to provide a stable environment for oneself or children if a paycheck is undependable, and if one has earned that paycheck then it should be delivered on time. I hope you will contact your unemployment office this afternoon if you can find the time, and get the answers you need asap. I really hope you will be able to resolve these issues soon and improve your situation. Best of luck!

3angelz 2 months ago


I have a difficult sitiation, i work for a franchise in tx. I am a stylist who gets commission. I was injured in 2013 and did not return to work until 2015. I worked for one year left and was rehired at the same company but a new franchise owner making at least three times what I made before. My Workers comp claim has just ended with the previous franchisee (in case that matters). I started working with a new owner Feb this yr. We are supposed to be paid the 1st and 15th of every month however over half of my paychecks have been paid late to me by 2 days or more. I only work 8 days a pay period and hours vary, If it's slow I can leave early, all my wages are commissions and tips. I work about 24 hrs/wk. However this job pays my bills. I know the laws regarding Fair Labor and wages and employment, so my question is this, does Texas consider it fair ground to quit a job due to the constant lack of on-time payments?

There's more, I am also currently part-time employed. Scheduled 30 hours a week at a new job I just started 3 weeks ago however this job will pay 2 - 3 times LESS then what I make at the other job. (I have not received my first check, but it will not be a "normal paycheck" as it provided paid training)

Can I recieve unemployment from the first job while I search for another job? With equal pay? (There is at least one complaint filed against him for this, I plan on filing and a coworker quit today and said she would, even if she doesn't) if there's proof could this change things?

There's still more... I have actually now worked for three franchise owners. The first owner was in a class action lawsuit for non-payment of overtime wages, which I was a part of (circa 2012). I thought nothing of it. But now this franchise owner is doing the same thing.

Is there any way to hold the company/corporation as a whole responsible and not just the individual franchise owners? It appears they are careless in the way they treat employees and corporate doesn't seem to mind them doing business this way.

Au fait profile image

Au fait 3 months ago from North Texas Author

Robert Sacchi, thank you for your insight. I agree!

Robert Sacchi profile image

Robert Sacchi 3 months ago

Thank you. Yes, the easiest way to avoid flack or discrimination trouble is to use the "need not apply" phrase. This doesn't stop an employer from throwing away a resume with an employment gap or other information that has things they don't like.

Au fait profile image

Au fait 3 months ago from North Texas Author

Robert Sacchi, thank you for your inquiry. I'm sorry to be so long getting back to you. For a while many employers said right in their job listings that if you were not currently employed they would not even consider your application. Others said if you had been unemployed for 6 months or longer they would not consider your application. I personally was told by a recruiter who called me that I would not be considered (2008) since I was not currently employed. Employers no longer put these things in their listings because some of them experienced some flack as a result. Not placing it in their listings doesn't prevent them from having a policy not to consider applications from unemployed people.

Homeless people have little chance of digging themselves out of the situation they're in because most employers won't even consider them for work. Yet everyone feels obligated to spit on them and sneer at them because they are without a job and homeless.

I'm sure every employer has their own attitude about unemployed applicants. Some may be willing to consider them while others do not. Those who will consider an unemployed applicant may punish them in other ways such as you mention, by offering lower compensation, etc.

Robert Sacchi profile image

Robert Sacchi 3 months ago

Good points. Does a longer period of unemployment make you more unemployable? When I got a permanent job it paid 60% less than what my previous job paid, and the benefits were much less also.

Au fait profile image

Au fait 3 months ago from North Texas Author

Robert Sacchi, thank you for reading and commenting on this article! You should have been able to collect unemployment benefits while you were working your first part-time job. Generally unemployment will make up the difference between your actual earnings from a PT job and your usual earnings from a full-time job.

Generally people who quit their jobs or who are fired (especially for cause) will not get benefits, however every claim is investigated and you may be one of the exceptions. Always file for benefits so that the reason you don't get them won't be because you didn't file.

Unemployment is an insurance program run by the government and employers must pay into it for every employee whether they like it or not. They will not get a penny back even if none of their employees ever collect.

If employers weren't required to pay into this program they would be able to pay employees higher wages/salaries. Therefore this benny is part of your compensation and should be utilized when needed just like you utilize your health insurance when needed.

It really makes no sense to accept a job that won't begin to pay the bills just so the neighbors and other busybodies will be happy you accepted a job over unemployment benefits. Keep in mind that most heroes are dead. Is it worth it to undermine your own best interests and those of your family just to impress the neighbors who don't have to live on the limited income or any results of your decision? Does that pat on the back from them really mean that much? Can you eat it?

The quickest way to lose burdensome weight is to stop caring what other people think. People who don't have to walk in your shoes, live in your skin, or deal with your experiences, and who really don't know even half of the details of your situation always have an opinion about what you should do and often like to share that opinion. People who are overly concerned with your character and your lifestyle don't have enough to do and should get a life of their own. Why do you care about impressing them? And if you're honest, are they ever truly satisfied with your decisions?

Never be afraid to collect unemployment benefits that you are entitled to. They are there to help you and your family get through a difficult jobless period. Always file for them when applicable -- and that is when you have lost your job for any reason, or quit your job for any reason..

Make job decisions based on yours and your family's needs, not on what people who don't have to live with the decision think. Collect on your health and life insurance the same way. :)

Robert Sacchi profile image

Robert Sacchi 3 months ago

Very informative. I made a big mistaske the last time I was unemployed. After a couple of months unemployed I got a part time job as a product demonstrator. Invariably I would make less money than unemployment was giving me. From a practical standpoint I was working for nothing. In desparation I took a job as a car salesman, which meant I had to quit the part time job. A couple of weeks into the car salesman job I got terminated, I wasn't able to sell any cars. Since I had previously quit the part time job I was ineligible to collect unemployment.

Au fait 4 months ago

Sammy, thank you for coming by! If your hours have been cut back considerably you can collect unemployment without quitting. Unemployment will make up the difference between what you earned before your hours were shortened and the present time.

There's a possibility you could collect unemployment if you quit, but if cutting your hours is causing financial difficulty, cutting them out completely is bound to cause even more distress. Better to stay put at your job, collect unemployment for the lost hours, and look for another job.

Sammy 4 months ago

If I'm working full time and the company restructure and they make me part time can I quit and get unemployment?

Au fait 4 months ago

DavidT9343, thank you for reading, and for your inquiry. All employers are required to pay into their state's unemployment fund according to how many employees they have, the number of hours generally worked by their employees, and the wages earned for that time period. They begin paying in when they begin employing people.

Employers do not get a refund if no employee ever receives benefits. On the other hand, if an employee or employees draw out benefits that exceed the amount paid in, an employer will have to pay in more to bring their account up to the maintenance level required by their state.

How many employees does your former company have? If there are several and all are being laid off because the company is closing, then most likely all will qualify to collect benefits. With so many people collecting it is likely your employer's account will be depleted, and your employer will have to pay more in. If there are several employees collecting the account will likely be depleted whether you collect or not.

Every employer is required to pay in for each employee they have in accordance with that employee's wages and hours worked. That is the reason many people advice people to collect if they can because it's part of your wages. If your employer didn't have to pay in as a protection for you in case you lose your job, s/he would be able to pay you a higher wage/salary and might very well do so. Unemployment insurance is one of the bennies you get for working.

If you do not apply for unemployment you will not get any. It's not like vacation pay that accumulates and is sometimes handed to you when you separate from the company without your asking for it. I have explained in this text how your benefits are determined.

You have my best wishes. I hope all comes out well for you and your employer.

DavidT9343 5 months ago

Hi, new here. I live in NY and work in NJ. Me and my boss are pretty close kinda like a father son thing, but he has been forced to retire and close doors. I would hate to burn such a important bridge by applying for unemployment if he has to pay out of pocket.....I am wondering does unemployment force him to pay after i'm laid-off or is it accumulated overtime and given to me by the state via their own account for employees ?

Au fait, the author of this timely article. 5 months ago

Chad, thank you for coming by. Since your benefits must be used up by August of this year, and there are still benefits available, I would call your local unemployment office and ask them why you have not heard from them. Normally you should hear something within 2 weeks of filing a claim. Usually later in the week is a better time to call them (right now) as the waiting/on hold time can be very, very long earlier in the week when everyone is calling. Best wishes!

Chad 5 months ago

I was getting unemployment benefits from company A off and on for 8 mths. My claim says stays effective until August 2016 but I've been laid off twice. I got benefits in august went back to work then laid off again in March then went back to work in April for same company but was for only 5 days to rig down then laid off again so I'm getting worried it's taking so long to get an answer on my newest claim.. There's still money left I didn't collect

Au fait profile image

Au fait 17 months ago from North Texas Author

Kristy, thank you for reading this article and for your inquiry as well. I hope you found answers to some of your questions in the text and are now more informed about how unemployment insurance works.

It would depend on how long you worked for Company B. If it was only for a week or maybe a month or so the answer is yes, you could file for unemployment again (depending on why you left Company B) and receive your unemployment benefits as before.

You may remember that I said benefits are based on what you were making 1 year and 1 quarter back in time, (Jan, Feb. Mar. is a quarter. Oct. Nov. Dec., is another quarter, for example.).

So if you worked for Company B for 6 months or more the amount of money you were making a year and a quarter back may be different. However, if you qualify for unemployment benefits then you should be able to go back to collecting as you were before working for Company B. The benefits may reflect a difference in your wages/salary.

The BIG question is, why aren't you working for Company B anymore? Did you quit or were you fired? Except for rare circumstances, if either of these is the reason you aren't working for Company B anymore, you will probably not qualify for unemployment benefits.

If your unemployment office accepts your reason for quitting a job as a good reason, you will likely get benefits again, or if they believe after an investigation that you were wrongfully fired, again you may get benefits. If you quit because you are tired of the job or any reason not considered responsible or reasonable, you will not get benefits. Likewise if your employer can prove you made glaring mistakes and even with their tutelage and patience made no improvement, you will not qualify for benefits.

Actually, if your prospective employer inquires from your previous employers as to whether or not they would consider hiring you again if an opening you qualified for presented itself, you want them to say YES. If they say no, that is a riddle a new employer doesn't want to have to solve. It could be any reason at all from sloppy work, not getting along with other workers, and really, there's no end as to why a previous employer might not be willing to rehire. A no to that question is often the end of any hopes you might have of getting that new job.

Employers are usually careful about what they say because of possible lawsuits. Lawsuits take up time and money that could be used somewhere else. If the community is aware of it, a lawsuit can affect how they are thought of by the general public including prospective employees and customers. Even when someone wins a lawsuit there are expenses involved.

Clearly lawsuits have been brought against employers for sharing too much about an employees work record and it has cost those employers in some cases dearly. That is the reason they are usually careful about what information they share and limit that information considerably.

I cannot give you a definitive answer to your last question, but unless an employer knows someone personally working at your state unemployment office, it is unlikely they will have access to any information about you that your unemployment office has. I would expect to be illegal to share any information on you with anyone but other government agencies, and often even that is illegal.

If a person working in the state employment office were to share info on you with a friend or anyone, that person would be putting their job in jeopardy if discovered, and I believe you could sue both that person and the unemployment office that s/he represented at the time, whether government or privately operated.

Privacy is a big deal whether it relates to an employer/employee, a health facility or practitioner, school records on anything at all, a private employment office or state employment facility, unemployment insurance, or really, anything at all. Any entity that crosses the line by sharing personal information they have collected in an official capacity takes a big risk.

You may have noticed that for the last several years prospective employers ask job applicants to sign a paper giving them permission to do a background check and to ask questions about an applicant from anyone they wish. They point out that when you sign you agree not to hold anyone legally responsible for anything they say or any information they provide regardless of the source. Of course if you don't sign your application will not be considered.

I haven't heard of any challenges to this common procedure, but I would expect there to be some since a person's livelihood is at risk. Very few people in this world are without any enemies at all. Any person could, according to the disclaimer on the document , say anything at all and not be held responsible however huge and outrageous the lie.

For answers to these questions I always recommend that you defer to your local unemployment office. Laws on unemployment insurance do vary from state to state, so call your local office and ask them these same questions. Very likely you'll end up talking to someone miles away. The information you're talking about will all come out in an investigation anyway, so there's no reason to fear talking to your local unemployment office.

Hope something here is helpful. Good luck whatever you decide to do.

Kristy 17 months ago

Couple things:

1). If I'm on unemployment from Company A, and I accept a part time 1099 job from company B, (which pays more than what I'm collecting, so I report it of course and stop collecting) - and then lose that 1099 job, can I be reinstated and counting to collect on the claim from Company A?

2) something you say about employers giving out "yes" or "no" to hiring again really freaked me out. My employer said they would not share anything about me just when I worked there. I'm now wondering why I'm not getting jobs - I have typically not had an issue and wondering if my employer said yes??? That seems so unfair without knowing the story.

3). Also do potential employers have access to unemployment records, like knowing you are on it, or what your stated reasons for leaving were?

Au fait profile image

Au fait 21 months ago from North Texas Author

esmil, you are very welcome and I wish you the best of luck in receiving benefits and in finding a new job. Your Unemployment office has lots of programs and help available to you to find a new and hopefully better job, so take advantage of it -- your tax dollars at work. :)

esmii 21 months ago

Thank you so much for your advice and I've already applied

Au fait profile image

Au fait 21 months ago from North Texas Author

esmil, thank you for your interest in my article. Whenever you quit a job or are fired from or laid off fro a job or lose a job for any reason at all, file for unemployment the very next business day. Even if you think you will not receive the benefits ALWAYS file for unemployment. ALWAYS. Let the people at the unemployment do their job -- which is to determine if you qualify for benefits. I know lots of people who received them and had not planned to file for them because they thought they wouldn't get them. FILE ASAP!

esmii 21 months ago

hi I was working at Walmart for 7 months and they laid me off they told me my time was up o don't get but can I apply for unemployment

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    C E Clark (Au fait)595 Followers
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    Ms. Clark has managed the administrative duties of several small businesses as well as collected unemployment on occasion herself.

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