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By JamieD
Published: July 28, 2010 Updated: April 25, 2014

Imagine the worst case scenario - you were just let go from a job that you've dutifully and successfully performed for years. Due to the recent economic downturn, many businessmen and women find themselves in this position for the first time in their careers. Whether you are job hunting or planning to use the time off to start your own business, learn the dos and don'ts of collecting unemployment benefits.

What are unemployment benefits?

The Federal-State Unemployment Insurance program provides temporary financial assistance to eligible candidates that are unemployed through no fault of their own. Unemployment insurance programs are created and administered by each state but operate under federal guidelines. Within these guidelines, states have sovereignty to determine the rules and regulations for their own programs, including what is considered 'no fault' unemployment, eligibility requirements, benefit amounts, and how long benefits are available.

How do I know if I'm eligible to collect unemployment?

Eligibility for unemployment benefits is determined by your state. In order to collect unemployment you must have first been collected a certain amount of wages or been employed for an established period of time. These requirements are called a 'base period' and they are used to determine the amount of benefit that you'll receive. Additionally, perhaps the most basic requirement for collecting unemployment is that you are classified as being unemployed through no fault of your own. Both your base period and fault are determined by the state and therefore these exact requirements differ from location to location.

Most states have additional requirements specific to their program. Locate your state unemployment insurance office for more information on determining your eligibility.

How are my benefit payment amounts determined?

Benefit amounts are generally based on a percentage of the applicant's earnings during the previous year of their employment. Each state sets a maximum amount that this percentage can accumulate to. While some states set very high maximums others set very low maximums. These amounts generally range from about $250 per week to $600.

For example, if Bobby lived in Massachusetts and earned $1000 per week, he would collect 50% of that (as determined by state law), or $500, in unemployment each week. However, if Peggy earned the same amount but lives in Alaska, where the benefit maximum is $370 per week, she would receive $370 in unemployment benefits each week.

Each state also determines the maximum amount of weeks that you are eligible for benefits. Visit your state's unemployment insurance office or speak to your former HR department on more information on the appropriate benefit amount.

Can I work while collecting unemployment?

The short answer is yes- but under certain limitations. Most states require individuals that are collecting unemployment benefits to be actively looking for a job. Like other requirements of the program, what constitutes as 'active' job searching is determined by your state, but generally can include activities such as going on interviews or submitting applications. To prove they're in compliance with this eligibility requirement, many people participate in part-time work. If you accept part-time work while you are collecting unemployment benefits, you'll likely receive an adjusted unemployment benefit.

For example, if Bobby accepted a part-time construction job that paid him $200 during his benefit week, his unemployment payment for that same week would be $300. Bobby's benefit checks would continue to subtract the amount he earned through his construction job until it met or surpassed his maximum amount of $500 when he would no longer receive benefits.

Individuals with marketable skills may be able to start a part-time business. If you start a part-time business - say cleaning homes once or twice a week - while collecting unemployment, you can most likely continue to collect unemployment payments under the adjusted calculations. Each state determines their requirements for what is considered part-time employment. These eligibility factors can be tricky - it's best to speak with an official at your state unemployment insurance office for information specific to your situation.

Can I start a full-time business while collecting unemployment?

Starting a business while collecting unemployment falls in more of a gray area. Most state laws that regulate unemployment focus on the work schedule (full vs part time work), not the specific work that is done (starting a business vs. working for someone else). Many states determine that full-time employment is a disqualification factor for collecting unemployment benefits. This applies even if your compensation for your new full-time business is less than what you were receiving in your previous job or through your unemployment payments. Therefore, if you start a full-time business, in most states you are disqualified from collecting unemployment.

Several states have established self-employment assistance programs to give unemployed workers the encouragement and assistance necessary to start a business. In this voluntary state program, instead of unemployment benefits, states pay a self-employed allowance to individuals while they are getting started as a business owner. These programs require applicants to be eligible for standard unemployment benefits and are paid under the similar criteria. Unlike those receiving unemployment benefits who must actively search for employment, these individuals work full-time starting their business

Speak to your state unemployment insurance office for guidance on the appropriate steps for starting a business while collecting unemployment.

How do I apply to collect unemployment benefits?

Claims for unemployment benefits can be filed through your state unemployment insurance agency. This can often be done over the phone or online. In most cases, you should file your claim in the state that you were employed. If you no longer live in that state, lived somewhere else during your employment, or worked in multiple states, the filing rules may be more complicated. In these situations, contact the agency that you currently live in for assistance in filing with the appropriate agencies.

Remember, regardless of how much unemployment you collect, these amounts are subject to Federal income tax and must be reported on your tax return. Your state unemployment insurance agency can withhold taxes from your payments if you opt to pay as you go.


If you have started a business while collecting unemployment payments or have any additional experience or concerns, share them in the Community!

About the Author:


Starting a business while on unemployment is not really a grey area. It is simply not allowed and if you are caught you will be required to pay back any money you received and you will not be able to collect benefits for a specified length of time. You are required yo report any work performed even if no money is earned while on unemployment. http://unemploymentrevolution.com
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Hey girl you write very well...! Love the work Online Hacking
hey that is the other way of taking unemployment..! any way i m really looking forward to start my own business.. Poker News
Can a government employee remains on the payroll and receives unemployment benefits for 6 months plus, while serving an indefinite suspension due to a reconsideration of eligibility for a security clearance
My question would be: If someone is claiming benefits and starts there own business i.e. home business and were receiving say $500 in benefits, then got a client of $200 in that period - From the above they should receive a benefit check of $300.However, is there any adjustment for costs incurred in starting the business in order to obtain that first client?- say the costs of starting the business were $1,000 - would this affect the $300 receivable? 
When starting a business it can build your resume skills for the future in finance, sales, and in other aspects of the business operations. It is important to know the unemployment benefits and laws surrounding  starting a new business and try to use your downtime wisely that you have while being unemployed. Many things can be accomplished while being unemployed but unfortunately many people don't take advantage of that time gap and don't start the business they dreamed of or they may be mired in the position of piling bills or layoff blues.Many people are experiencing layoffs for the first time after having well established careers. When you start a business it not only adds to that sense of venture but it may be successful where you don't need to have a job and will be free from the time clock.

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