Self-Employed Workers and Unemployment: What You Need to Know

Self-employed workers cannot receive traditional unemployment insurance in most states. Unemployment benefits are designed for employees who lose a job through no fault of their own — self-employed people are not in an employer-employee relationship, so they do not pay into the standard unemployment system and are not covered by it.

However, self-employed workers have other options depending on your situation and your state. During the COVID-19 pandemic, the federal government created a temporary program called Pandemic Unemployment information (PUA) that covered self-employed workers, gig workers, and others normally excluded. That program ended in September 2021. Some states now offer their own programs for self-employed workers, and you may also be able to access other forms of income support if you meet the requirements.

Key Takeaways

  • Self-employed workers do not pay into traditional unemployment insurance and cannot claim standard unemployment benefits in any state.
  • Some states offer their own programs specifically for self-employed workers, though these vary widely by location and are not available everywhere.
  • If you are self-employed and your income has dropped, you may be able to access other support programs like SNAP, emergency information, or low-income housing programs depending on your income and assets.
  • Gig workers and contract workers have the same limitations as self-employed workers unless your state has created a separate program.

Why Self-Employed Workers Are Not Covered by Standard Unemployment

Unemployment insurance is funded by employer payroll taxes. When you are self-employed, you do not have an employer paying into the system on your behalf. You pay self-employment tax, which covers Social Security and Medicare, but not unemployment insurance. Because you do not contribute to the unemployment fund, you cannot draw from it.

This applies whether you are a sole proprietor, a freelancer, a contractor, or run a small business. The structure of the program assumes an employer-employee relationship that does not exist in self-employment.

State-Specific Programs for Self-Employed Workers

A small number of states have created their own unemployment or income-support programs for self-employed workers. These programs vary significantly in what they cover, how much they pay, and who qualifies. New York, for example, has explored self-employed unemployment programs, but availability and rules change. You will need to check your specific state's labor department website to see whether such a program exists where you live.

To find out what your state offers, visit your state's labor or employment department website directly. Search for "self-employed unemployment" or "self-employed benefits" along with your state name. If your state does not have a dedicated program, the website should direct you to other resources.

Other Income Support Programs You May Be Able to Access

If your self-employment income has dropped significantly or stopped, you may be able to access other forms of support based on your current income and household size. These programs do not replace lost business income the way unemployment would, but they can help cover basic needs while you rebuild.

SNAP (food information) is available to self-employed people whose income falls below the limit for your household size. Your business expenses can be deducted from your gross income when determining whether you may have access to. Emergency information programs in your county or city may help with rent, utilities, or other urgent bills. Low-income housing programs may reduce your rent if you meet income requirements. Medicaid covers health care for people below a certain income threshold, which varies by state.

To explore these options, contact your local 211 service (dial 211 or visit 211.org) and describe your situation. They can tell you which programs are currently open in your area and what documents you will need.

What Happened to Pandemic Unemployment information (PUA)

During 2020 and 2021, the federal government created Pandemic Unemployment information specifically to cover self-employed workers, gig workers, and others excluded from traditional unemployment. This program ended on September 6, 2021, and is no longer available. If you received PUA during the pandemic and have questions about overpayments or your account, contact your state's unemployment office.

Some people who received PUA were later asked to repay benefits because of may be able to access questions. If you received a notice about repayment, you have the right to request a hearing to dispute it. Your state unemployment office can explain the process.

How to Document Your Self-Employment Income for Other Programs

If you are explore for SNAP, emergency information, or other income-based programs, you will need to show proof of your self-employment income. Programs typically ask for tax returns from the past one or two years, or recent bank statements showing business deposits. Some programs will also accept profit-and-loss statements you prepare yourself.

Keep copies of your most recent tax return (Schedule C if you file federal taxes), bank statements from the past three months, and any invoices or receipts showing current business activity. If your income has dropped recently, be ready to explain why — a letter describing the change can help programs understand your situation. Different programs ask for different documents, so check what each one requires before you gather everything.

Frequently Asked Questions

Can I get unemployment if I am a contractor or gig worker?

No, contractors and gig workers are treated the same as self-employed workers under traditional unemployment insurance. Some states have created separate programs for gig workers, so check your state's labor department website. Otherwise, you would need to look at the same income-based support programs available to self-employed workers.

What if I was laid off from a job and also do freelance work on the side?

If you lost a traditional job where you were an employee, you may be able to claim unemployment for that job even if you also have self-employment income. Your self-employment income may reduce the amount you receive, depending on your state's rules. Contact your state unemployment office to report both sources of income.

Can I claim unemployment if my business failed?

No. Unemployment insurance covers job loss, not business failure. If your business closed, you would not be covered by unemployment. You may be able to access other support programs based on your current income and household size.

Do I need to pay back any pandemic unemployment information I received?

Some people who received Pandemic Unemployment information were later determined to be ineligible and asked to repay benefits. If you received a notice, you have the right to request a hearing to dispute the decision. Contact your state unemployment office for information about the appeal process.

What if my state has a self-employed unemployment program but I do not think I may have access to?

Contact your state's labor department directly and ask to speak with someone about your specific situation. Rules vary, and staff can explain whether your circumstances might meet the requirements. Do not assume you are ineligible without asking.