Layoff Guide: Can I Earn Money While Receiving Unemployment Benefits?
The short answer is yes!
The long answer is that each state has different rules about how unemployment insurance (UI) is calculated when you’re also earning money through part time or gig work. In my last article in the Layoff Guide Series, I covered the steps for filing for UI including how UI works, who qualifies, and how to receive benefits. In this article, I’ll talk about why partial work is worthwhile.
You might be thinking, why would I work at all when I’m supposed to be searching for full time employment? There are quite a few reasons, not least of which is having a little more money on top of your weekly benefits. You can also network, develop your existing skills, and even add new skills to your resume.
For some people, finding a new job can take longer, especially if they live somewhere with fewer opportunities. That’s why most states encourage people to take any available work when they can while unemployed. Temporary or part time work can lead to a full time job by showing employers that you were proactive during your unemployment period.
Note: I’m not an employment lawyer. I’m not affiliated with the Department of Labor or any state’s unemployment insurance agency. Each state has different rules and requirements for UI so please contact your state’s agency if you have questions about the filing process.
Partial work and UI benefits
It definitely feels better when we have some source of income while unemployed, even if it isn’t much. Part time or project work can also keep your skills fresh, give you small wins, and show your resilience to future employers.
The Department of Labor refers to any part time, contract, freelance, or gig work as “partial work.” Those who only have partial work can still claim UI benefits if their hours were cut or they were laid off from full time employment.
Example: Working part time for your current employer
Employers sometimes choose to cut hours instead of letting go of employees. This option makes it easier to bring employees back full time when things improve. Employees also don’t have to scramble to find work elsewhere. If your company plans on bringing people back full time within a few months, you might want to stick around.
Typically, reduced hours still qualifies you for UI benefits, depending on your state. Let’s say that instead of working 40 hours a week at $20/hr, your employer cuts you down to 10 hours a week at $20/hr.
Your state’s UI agency will deduct what you have earned from your weekly benefits amount. Many states, but not all, have something called earnings exclusion or earnings disregard. Part of your earnings won’t count towards a reduction in your UI benefits for the week.
Earnings exclusions can be a set amount, like $25/week, or a fraction, like ⅓ of your week's earnings. Again, each state is different, so double check!
Crunching the numbers
Let’s say that you live in a state with no exclusions and qualify for $425 in weekly UI benefits. Based on the example above, your UI benefits will look like this:
$425 - $200 (10 hours a week x $20/hr) = $225/week in UI benefits
Your total income for the week will still be $425
But if you live in a state with $25 in exclusions, your earnings will look like this:
$425 - $175 (10 hours a week x $20/hr - $25 exclusion) = $250 in UI benefits
Your total income for the week will be $450
In short, an earnings exclusion means that you can end your week with more money than if you were relying solely on your weekly UI benefits.
Part time, freelancing, and gig work
If you’ve been completely laid off, you can choose to work part time somewhere else, or as a contractor or gig worker. Here are a few examples of partial work and why it might be worth your time.
Part time work
Good luck getting one definition of “part time work.” The Bureau of Labor Statistics defines part time work as fewer than 35 hours per week. The Affordable Care Act says part time work is fewer than 30 hours per week. The Unemployment Insurance Code for California doesn’t even have a definition of full time or part time work!
Confusing right? That’s why it’s so important to understand what the rules are in your state. Regardless, part time work can get your foot in the door at a company that fits your skill sets. Consider an hourly position as a receptionist or office admin, for example.
Not only will this increase the amount of money your bank account sees on a weekly basis, but it also gives you the chance to meet managers and recruiters in your industry. Use these interactions to build relationships and find out about full time job opportunities early. Networking is the best way to get job referrals.
Warning: Be careful when choosing a part time job. If you don’t like it and decide to quit, you’re no longer eligible for UI benefits.
When you receive UI, you must take any available work that falls within your career and skill set. So stick with the part time job until you find full time employment, otherwise you’re refusing work.
Gig work
Gig work like ride sharing or food delivery can show potential employers your resilience, ability to think on your feet, and commitment to contributing to the workforce. Add this work to your resume and talk about how you’re learning about time management and customer service. This also happens to be another way to network if you’re in the restaurant, food, or service industries.
Improve your existing skills
It’s not for everyone but freelancing is a great way to keep yourself sharp while you job hunt. Sites like Upwork or Fiverr are job marketplaces that make it easy to find work, even if you’re new to freelancing. I got my start on Upwork.
Perhaps you’re a marketer looking for work. Find jobs for copywriting, social media, and event planning. You can expand on your existing skills by applying them in new ways like with different use cases or other industries. Ask your clients for recommendations that you can put on LinkedIn and your resume.
Build new skills
If you didn’t like the work you were doing in your last role, freelancing is a great way to build a new career. Take online courses and learn how to code, write marketing copy for small businesses, or get into graphic design by making logos. From here, take on small projects with clients. This will beef up your resume and help you get a job that you’re excited about.
Reporting wages while collecting UI benefits
It’s absolutely necessary that you report the wages you earn while you’re collecting UI benefits. Don’t try to keep part time work a secret from your state’s UI agency. At the end of the year, you’ll file your taxes and so will your part time employers or freelance clients. Don’t commit unemployment insurance fraud. The U.S. government will catch you.
Each state has different rules regarding part time work and UI, so take some time to research your specific state’s rules before you accept any work. You won’t get in trouble for accepting work but you may get disqualified from UI if you earn “too much” money. I wish it was more straightforward but with 50 states all making their own rules, it’s impossible for me to give precise guidance.
It’s your insurance, use it!
Employment in the United States is complicated and the rules for UI vary by state. It’s important to do your research and find out exactly how to qualify, receive, and maintain your benefits while you hunt for a full time job.
Remember, Unemployment Insurance is a BENEFIT. It’s your safety net that keeps you in your home when you’re unexpectedly laid off. You pay taxes, so make use of this government program!
Check out the rest of the Layoff Guide:
How to Take Care of Yourself, Your Finances, and Your Health
Understanding Severance Agreements
Can I Earn Money While Receiving Unemployment Benefits
Important information —thanks for sharing it!