Self-Employed Workers and Unemployment Benefits

Most self-employed workers cannot collect traditional unemployment insurance, because that program is designed for employees whose employers pay into the system. However, self-employed people have other paths that may provide income support during periods without work—and some of those paths opened up or expanded during the pandemic.

The key difference is how the system works: unemployment insurance comes from employer payroll taxes, and self-employed people have no employer paying those taxes on their behalf. But self-employed people do pay self-employment tax, and some programs recognize that contribution. The options available depend on your state, your income level, and whether you are currently working or have stopped.

Key Takeaways

  • Traditional unemployment insurance is not available to self-employed workers in most states because employers do not pay into the system on their behalf.
  • Self-employed workers may be able to claim income support through Pandemic Unemployment information (PUA) if they lost work due to COVID-19, though this program is no longer active in most states.
  • Some states offer Self-Employment information programs that provide weekly payments while you start or rebuild a business, funded by your state's unemployment insurance account.
  • If your self-employment income dropped significantly, you may be able to claim benefits based on reduced earnings through your state's partial unemployment program.
  • The fastest way to know what your state offers is to contact your state's unemployment insurance office directly, because programs and rules vary widely.

Why Self-Employed Workers Are Usually Excluded

Unemployment insurance is funded by taxes that employers pay on employee wages. When you are self-employed, you are both the employer and the employee, so there is no employer paying into the system. The program was built around the assumption that an employer would contribute, and most states have not changed that structure.

This does not mean you have no safety net—it means the safety net works differently. Self-employed people pay self-employment tax, which covers Social Security and Medicare. Some states have created separate programs that recognize this contribution, but they are not the same as traditional unemployment insurance.

Self-Employment information Programs in Your State

A small number of states run Self-Employment information programs that pay self-employed workers a weekly benefit while they are starting or rebuilding a business. These programs are funded by the state's unemployment insurance account, and they exist in about 17 states. The weekly payment is usually the same amount you would receive if you were unemployed, but you receive it while you work on your business instead of while you are idle.

To use a Self-Employment information program, you typically need to show that you are actively working on a business plan, meeting with a counselor or mentor, and taking steps to launch or grow the business. The program is not a grant—it is a temporary income bridge while you build something. States that offer this include New York, New Jersey, Delaware, Maryland, and others, but the list changes. Your state unemployment office can tell you whether your state has one and what the current rules are.

The process process usually involves submitting a business plan and meeting with a program counselor. Approval can take several weeks, so this is not a fast option if you need money when ready.

Partial Unemployment When Your Income Drops

If you are still self-employed but your income has dropped significantly, some states allow you to claim partial unemployment benefits based on the difference between your normal earnings and your current earnings. This is not the same as full unemployment—you are still working, but earning less than usual.

To claim partial unemployment, you typically need to report your current weekly earnings to your state's unemployment office. If your earnings fall below a certain threshold (which varies by state), you may receive a partial benefit that makes up part of the difference. The calculation is usually: your normal weekly wage minus your current weekly wage, minus a small amount the state allows you to earn without losing benefits.

This option requires you to keep records of your income and report it regularly. It is most useful if your self-employment work is temporary or seasonal, and you expect your income to return to normal.

Pandemic Unemployment information (PUA) and What Happened to It

During the COVID-19 pandemic, the federal government created Pandemic Unemployment information (PUA), which was specifically designed to cover self-employed workers, gig workers, and others not may be able to access for traditional unemployment. PUA provided a weekly benefit to people who lost work due to the pandemic.

PUA is no longer active in most states. The program ended in September 2021 in most places, though a few states extended it slightly longer. If you lost work during the pandemic and did not claim PUA at the time, you cannot go back and claim it now. However, if you were receiving PUA when it ended and believe you were underpaid or wrongly denied, some states have settlement processes—contact your state unemployment office to ask whether a settlement is available.

What to Do If You Cannot Get Unemployment

If your state does not offer Self-Employment information and you do not may have access to for partial unemployment, you have other options to explore. The Small Business Administration (SBA) offers disaster loans and other support for self-employed people facing hardship. Some states have emergency information funds for workers who do not may have access to for unemployment. Local nonprofits and community action agencies sometimes have emergency grants or loans for self-employed people.

You can also look into whether you are may be able to access for other federal or state programs based on your income level—food information, housing support, or utility information do not require you to be unemployed, only to meet income thresholds. A 211 referral (dial 2-1-1 or visit 211.org) can connect you to local programs in your area.

If you have employees, you may be able to claim a Paycheck Protection Program (PPP) loan if you are still in the window to do so, though most of that program has closed. Check with your accountant or the SBA website to see whether any programs are still open.

How to Find Out What Your State Offers

The fastest way to learn what is available to you is to contact your state's unemployment insurance office directly. You can find it by searching "[your state] unemployment insurance office" or by visiting your state's labor department website. When you call or visit, tell them you are self-employed and ask what programs are available to you.

Have your Social Security number, business information, and recent income records ready. The office can tell you whether your state has a Self-Employment information program, whether you might may have access to for partial unemployment, and what the process process looks like. They can also tell you whether any emergency programs are currently running.

If you cannot reach your state office by phone, many states now have online portals where you can submit questions. Response times vary, but email is often faster than calling during busy periods.

Frequently Asked Questions

Can I get unemployment if I closed my business?

If you closed your business and are no longer self-employed, you may be able to claim traditional unemployment if you worked as an employee somewhere else. If self-employment was your only work, most states will not cover you. However, some states have emergency information programs for people who lost business income—contact your state unemployment office to ask.

What if I am a gig worker or contractor?

Gig workers and independent contractors are treated the same as self-employed people under most state unemployment laws. You typically cannot claim traditional unemployment unless you also work as an employee somewhere. Some states have special programs for gig workers, so ask your state unemployment office what is available.

Do I need to show that I am looking for work?

Traditional unemployment usually requires you to search for work and report your efforts. Self-Employment information programs typically require you to work on your business instead—you do not need to search for a job. Partial unemployment requires you to keep working at your self-employment while reporting reduced earnings.

How long does it take to get approved?

Self-Employment information programs usually take three to six weeks to approve because they require a business plan review. Partial unemployment can be faster—sometimes one to two weeks—if your state processes it quickly. Call your state office to ask about current processing times.

What if my state does not have a Self-Employment information program?

If your state does not offer Self-Employment information, ask about partial unemployment or emergency information programs. You can also explore SBA loans, local nonprofit grants, and income-based information programs like food or housing support. A 211 referral can connect you to what is available in your area.