Can You Collect Unemployment When Underemployed?

If you were subject to a lay-off when your employer went out of business or cut back its labor force, it's obvious that you qualify for unemployment benefits. If your employer reduced work hours -- or you had to take a low-paying job while seeking an adequate replacement -- you may be eligible to receive benefits as an underemployed worker. While states' laws defining eligibility for benefits for underemployed workers vary, many unemployment agencies allow underemployed workers to collect partial benefits.

Underemployment and Benefit Eligibility

For many workers, losing a significant number of paid hours can lead to a financial crisis similar to that of being laid off entirely, and many states allow workers to claim benefits to lessen the impact of underemployment. In most states, workers with a full-time work history but have their hours cut back may make an unemployment claim based on the difference in income between their historical earnings and their present earnings. All states allow workers some leeway to work a part-time job while collecting unemployment, although the amount can collect varies significantly.

Applying for Underemployment Benefits

When states allow workers to receive benefits based on underemployment, filing a claim follows the same procedure as applying for unemployment benefits. Applicants must provide basic information such as their name, address and information for every employer in the past 18 months. As with unemployment benefits, applicants must be underemployed by no action of their own -- workers who voluntarily reduce their number of hours worked don't qualify -- and must have enough working hours over the prior five or six quarters to meet state eligibility requirements.

Benefit Calculation

Although it's not unusual for states to provide benefits to underemployed workers, how they calculate the amount of that benefit varies significantly between states. Some states provide benefits based on the portion of a worker's earnings lost in the reduction of hours. For example, a worker with a reduced schedule from five days a week to three might be eligible to receive 40 percent of his full benefit. Most states reduce benefits in relation to income, so the amount a worker receives each week may depend largely on his wages. Consult your state department of labor for information on benefit calculation for part-time and underemployed workers.

Continued Eligibility

In all states, workers who receive unemployment insurance benefits when they're underemployed must meet requirements each week to continue to receive their benefit. Beneficiaries must continue to search for adequate full-time work, making a required number of employment contacts each week, and must be able and available to take a job if one becomes available. If work schedules interfere with meeting these requirements, a beneficiary may lose eligibility for benefits.

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