If you've been fired or laid off, there's state unemployment insurance to fall back on. If you're injured on the job, there's workers' compensation, or even private disability insurance if you have a policy. But what if you are one of the millions of Americans -- nearly one in five of us (18.6%) according to the latest Gallup numbers -- who are underemployed, defined as still drawing income from reduced hours or part-time work?
Depending on where you live, you may qualify for partial underemployment or work-share benefits, little-known state programs that can help bridge the gap between what you're making now and what you used to make.
So much for the myth that you have to be unemployed to receive unemployment benefits.
"That's not true," says Bruce Meyer, McCormick Foundation professor of public policy at The Harris School, University of Chicago. "In many states, you can get part of your unemployment benefits even if you're working part time at lower earnings than you used to receive at your old job."
All states provide some partial benefits for qualified unemployed workers who accept part-time employment while looking for their next full-time job. Many states also have underemployment provisions to assist full-time employees with reduced hours.
Work-share programs typically tap state unemployment reserves to cover the difference in take-home pay for employees whose hours are reduced by 10% to 40%, a move aimed to help employers and employees avoid layoffs.
Employers typically must apply for acceptance into a work-share program. States such as Colorado, which launched its work-share program in June, make the program affordable by cutting back the number of weeks that employees can draw partial benefits from the unemployment fund.
At least 20 states currently offer work-share underemployment insurance, including Arizona, Arkansas, California, Colorado, Connecticut, Delaware, Florida, Iowa, Kansas, Louisiana, Maryland, Massachusetts, Minnesota, Missouri, New York, Oregon, Rhode Island, Texas, Vermont and Washington state. Six other states, including Hawaii, Ohio, Oklahoma, New Hampshire, New Jersey and Pennsylvania, are considering work-share legislation.
"It's clear that you have a partial entitlement if your work history is full time and either your employer cuts you back substantially, say from five days a week to two, or you were laid off and accepted some kind of part-time work with a new employer," says George Wentworth, senior staff attorney and unemployment specialist with the National Employment Law Project, or NELP.
You apply for underemployment benefits the same way you file for unemployment, by contacting your state's Department of Labor. Along with your ID and Social Security number, be prepared to provide contact information for your most recent employer and the date of, and reason for, your termination.
Most states then examine your earnings for the first four of the past five quarters (your "base period") to determine your weekly benefit amount, or WBA. On average, states attempt to replace 50% of a worker's lost wages, but cap the weekly benefit at or near the state's average weekly wage, according to the U.S. Department of Labor.
If you multiply your WBA by 26 weeks (the average unemployment benefit period in most states), you arrive at the fund pool available to you during your benefit year, which starts when you file.
If you were to collect full unemployment, you would blow through your state benefits (or continue under federal unemployment insurance extensions) after 26 weeks. But because you're working part-time or reduced hours, and a portion of those earnings will be used to reduce your WBA, your partial benefits could extend beyond the 26 weeks.
For partial unemployment filers, the states use widely varying formulas to subtract your part-time earnings from your weekly benefit amount, plus a little extra as an incentive to nudge you toward a new and better job.
"The formula in Connecticut is: If you have the maximum weekly benefit of $555 and take a part-time job that pays you $300 a week, Connecticut law would deduct two-thirds of what you earn from your weekly benefit. Two-thirds of $300 is $200, so they would deduct $200 from the $555, which leaves you with a benefit check of $355 plus the $300 that you earned," says Wentworth.
The good news is, most states allow for some flexibility in partial unemployment, a lifesaver for many jobseekers who need part-time work to stay afloat. "It's a week-by-week determination," says Wentworth. "You can collect a partial benefit one week and then go back to working. Any week that you are unemployed during the benefit year, your WBA is set at that rate."
The bad news is, too much part-time work could cost you your underemployment benefits. "In most states, you can probably work one or two days part time, maybe even three, and probably still get some kind of partial unemployment benefits," he says. "But generally, if you're working much more than that, the likelihood of you qualifying drops substantially."
Collecting underemployment benefits may not be advisable in all cases, especially if you hope to return to your old job one day.
"In some industries, we do see workers who are reluctant to do it because they know that the costs of the benefits are going back to the employer and they're concerned that their employer is going to hold it against them. And that does happen," Wentworth says.
During periods of high unemployment, Wentworth says underemployment insurance can play a vital role in putting America back to work.
"You don't want workers to be financially penalized in a big way because they decide to take a job for one or two days a week in a new field that they're just trying out. You don't want policies that basically tell a worker that they're better off staying on unemployment insurance."
Bottom line: Contact your state unemployment office to find out if you qualify for underemployment insurance.