While you might’ve heard about unemployment benefits, it’s likely you aren’t completely sure how they work. The idea is simple enough: When an employee is let go at no fault of their own, they are entitled to unemployment insurance, a temporary federal-state program. Former employees apply through their own state and receive benefits for a set amount of time or until they find new employment. Determining how unemployment benefits are decided is a little more complicated.

How much?

Unemployment insurance is meant to alleviate the financial burden that comes with losing a job, but it does not entirely replace your income. The amount is different for each individual, depending on how much you made prior to being let go.

All states use previous earnings to calculate exactly how much, but each will have a different method for determining what that number will look like. For example, some may use a person’s wages during a highest-paid quarter or the previous year. Another commonality in the system is upper limits on the benefits given to a worker each week. In many cases, a cap is determined by the average earnings in a state and the employee will receive about 50 percent of their previous wages.

Because this is considered income and paid through funds that employers pay into through taxes, the unemployment benefits are taxable. It’s also important to remember that earning additional income while receiving benefits will lower what the government sends you. As soon as you find new employment, you must let your state agency know so you will stop receiving the insurance.

How long?

Most states will pay unemployment benefits for up to six months, although recently more states have started paying for a shorter period of time. This means within six months, you should have found a new position and no longer need to receive this income.

In some cases, when unemployment rates are uncharacteristically low, there are extension programs that may permit you to receive your benefits longer than the standard 26 weeks. The Emergency Unemployment Compensation (EUC) is a federal program that goes beyond what the state can offer. It’s a tiered system meant to assist when you can longer receive benefits from the state and pays between 10 and 14 additional weeks, depending on your state’s unemployment rate.

Like FUTA, Extended Benefits is a joint federal-state program that goes into effect when unemployment rates are very low. While no states currently qualify for this, workers will earn 13 to 20 weeks of additional income.

Managing unemployment claims

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