The freelance worker has gone from niche to mainstream, with a recent survey by MBO Partners finding that almost 73 million workers in the U.S. are independent, with 63% of them reporting that they are independent by choice. In fact, per that same survey, over a quarter of Gen Z are freelance or self-employed.
But freelance work can also come with instability, and all it takes is one abruptly dropped contract or dip in workload to find yourself in a tight financial situation. But if you are self-employed, what do you do when the work dries up and you’re effectively... unemployed?
Unemployment benefits—more formally called unemployment insurance—are payments made by a government body to workers who find themselves unemployed through no fault of their own. In some countries, the program is administered at the federal level, but in the U.S., each state creates their own rules and requirements around the distribution of unemployment insurance. It's not an automatic process or a permanent solution; you apply for it as a temporary Band-Aid until you can find new employment.
You’ll want to check out the state you live in to get the specific qualifications for accessing unemployment. To give you an idea of what to expect, however, let’s take a look at Oklahoma:
Individuals are eligible if they:
• Are unemployed through no fault of their own.
• Are able and available to seek and accept work.
• Earned a minimum of $1,500 from a covered employer during their base period.
• Meet the "1 and 1/2 rule" which states that the total wages of the base period must be at least one and a half times the amount of wages earned during the highest quarter of an individual's base period. More information on this rule can be found in Oklahoma Statute Title 40 Section 2-207.
• For Example, if an individual earns $24,000 during Q3, the total wages for their base period would need to be at least $36,000 to meet the "1 and 1/2 rule".
If you meet these eligibility requirements, in Oklahoma, you can verify your identity and file a claim to start the process. You will also have to register as a job seeker on the EmployOklahoma website to demonstrate that you are actively looking for new employment.
Again, though: all of this varies from state to state. You need to check with your state’s employment and labor office and services about how to qualify and proceed.
Unfortunately, the answer is complicated and once again varies by state. For example, using Oklahoma as an example again, their unemployment benefits page directly states:
Since UI is an insurance paid by Oklahoma employers, it is not available for self-employed, contract or gig workers.
In most cases, if you are a fully self-employed worker, you likely can’t access traditional unemployment benefits, but there are other potential sources of support.
Do you qualify as an employee?
A number of states use the ABC test to determine whether an independent contractor is actually an employee. They're only considered an independent contractor if:
• They are free from the employer's control or direction in performing their work, both contractually and in actuality
• The work performed is outside the usual course of the entity's business
• The worker is customarily engaged in an independently established trade, occupation, or business of the same nature
This is a voluntary, federally endorsed program that has been adopted by approximately 8 states as of 2022 and is designed specifically for entrepreneurs and the self-employed. SEAP provides weekly allowances while you work on establishing or rebuilding your business. Instead of having to prove that you’re actively looking for work, you show them that you’re engaged in full-time business-building activities.
Per Congress.gov, the following states have active SEA programs: Delaware, Mississippi, New Hampshire, New Jersey, New York, Oregon, Pennsylvania, and Rhode Island.
Self-employed individuals—including small business owners, contractors, etc.—can qualify for temporary benefits as a result of a major disaster that has caused either job loss or an interruption in employment.
If you live, work, or were scheduled to work in a declared disaster area, you could potentially qualify for DUA if you meet the following conditions:
• No longer have a job or place to work
• Can’t reach your job site
• Can’t work because of damage to the job site
• Were about to start a new job but, due to the disaster, the job no longer exists
• Can’t work because of an injury caused by the disaster
• Became the major support for a household because the head of household died due to the disaster
You must be available and able to work, unless you meet one of these two conditions:
• You have an injury caused by the disaster, or
• You are taking steps to return to self-employment.
The Freelancers Union is a free organization designed to support the growing number of self-employed and gig workers. This includes resources on insurance plans, guides on taxes and credits, support handling clients who won’t pay, LLC formation, and more. The Freelance Solidarity Project is also available with links to job boards and opportunities.
Freelance and gig work can offer a lot of benefits over being a traditional employee. It gives you more freedom to choose your work, choose how much you take on and therefore how much you can potentially make. It’s important, however, to know what resources are and aren’t available to you when you’re a freelancer and plan ahead, so you aren’t left adrift when you hit a rough patch.