The Full Picture: How to File For Unemployment Benefits and Who Pays For It

As a small business owner, you might have to terminate employment relationships for various reasons. In such cases, your former employees may be eligible for unemployment insurance, which can provide a financial cushion while they search for the next opportunity. However, navigating the process of how to file an application and determining who pays for unemployment benefits isn’t always straightforward. This guide breaks it all down.

Who is Eligible for Unemployment Benefits?

Eligibility for unemployment benefits varies by state. Most states follow a general framework. If an employee loses their job through no fault of their own, they likely qualify. This includes employees who were:

• Laid off due to downsizing, budget cuts, or restructuring

• Let go because of company closure or lack of work

• Working reduced hours but still actively employed

Some may also qualify if they quit for a "good cause" that left them with no other choice. Examples include discrimination or a spouse’s military transfer. These situations require additional documentation and approval from the state’s unemployment office.

Applicants must meet the state’s work and wage requirements, which usually involve earning a specified amount during a base period of 12 to 18 months. To remain eligible for benefits each week, they must be physically able to work and available for employment. Additionally, they must actively seek work.

Many states require applicants to document their job search or use a state-specific job search website. For instance, Pennsylvania requires its unemployed residents to register with PA CareerLink within 30 days of filing for benefits. Most state unemployment websites have a quick pre-screening tool to help assess eligibility before starting the application process.

Who Pays for Unemployment?

In most cases, it's not the employee who pays for unemployment benefits. Instead, a portion of the employer's payroll taxes covers the cost. This means if you're the employer, you indirectly pay unemployment compensation through state and federal payroll taxes, which state governments then distribute. Only Alaska, New Jersey, and Pennsylvania require employees to contribute to the program.

How to File for Unemployment Benefits

Filing for unemployment compensation may seem like a headache, but it’s easier when your former employees know what to expect. You can share this step-by-step guide with them:

1. Check the State’s Requirements

Each state runs its unemployment insurance program, so start by visiting your state’s unemployment website. You’ll find key eligibility information and specific filing instructions. Additionally, the required documents will be listed.

2. Gather Information

Before applying, collect the following information:

• Social Security number (or Alien Registration Number if not a citizen)

• Contact information and dates for all employers from the past 12-18 months

• Pay stubs or proof of earnings

• Banking information for direct deposit, if needed

3. Set Up an Account

Most states require former employees to set up a secure online account through the state's unemployment portal before applying for benefits. Through this account, they can upload documents and submit their application. They can also check the status and certify their weekly claims.

4. File a Claim

Most states allow applicants to file online or by phone. Some also offer a mobile app for filing. The process includes answering questions about the employment history and the circumstances of its termination. Answer honestly and directly, as errors and vague answers can delay the claim.

5. Certify Each Week

After filing, former employees need to log in each week to confirm they’re still eligible and available for work. Only then do they receive their unemployment benefits each week.

Common Mistakes to Avoid When Filing for Unemployment

Unemployment systems are strict, and even minor mistakes can result in delays. Here’s what to watch out for:

• Waiting Too Long to Apply: Benefits aren’t retroactive in most states, so filing even a week late can mean less money.

• Giving Inconsistent Information: If the reasons for separation differ between the employer and the employee, the claim may be flagged.

• Listing the Wrong Employer: The claim must be tied to the most recent job, even if it wasn’t the longest one.

• Forgetting to Register for Work: Some states require applicants to register with their job search portal right after filing. Skipping this step may result in being disqualified.

• Missing Weekly Certification: Without certification, payments stop. It might be a good idea to set up a weekly reminder or post a note in a visible location.

What Happens After Filing for Unemployment Benefits?

Once a claim is filed, it undergoes a review process. Most states take one to three weeks to process the application. During that time, you, as the former employer, or the state may require more information from the former employee. Delayed responses can slow down the process.

If approved, the state sends the applicant a monetary determination letter showing the weekly benefit amount and the calculation used to determine it. Payments only start after applicants certify, even if the state has approved the claim.

If the state denies the claim, a notice explains why and provides instructions on how to file an appeal. Appeals are time-sensitive. Former employees should check their accounts regularly for updates and remember that weekly certification is mandatory, even during the review period.

Can Employers Appeal Unemployment Claims?

As the former employer, you can appeal if you believe an ex-employee is not entitled to receive benefits. Appeals usually arise when there’s a discrepancy in the reason for the job loss. For instance, if the employee claims it was a layoff, but you reported it as termination for misconduct.

If you appeal, you get a hearing date. It's a chance for both parties to present their side. Bring documentation that supports your case, including emails and performance reviews. A state representative makes the final decision based on the facts from both sides.

Boost Compliance with Justworks Support

Job terminations can be stressful, but understanding how unemployment benefits work means there's one less thing to worry about. Check your state's regulations and get the compliance support you need so you can focus on your business. Justworks streamlines HR tasks and offers coverage with access to workers’ compensation and state unemployment insurance. Get started with Justworks today.