The Coronavirus has had a serious impact on the US, from people concerned about their health as well as the health of their loved ones. It has also led to record job loss and many businesses who have been unable to continue operating due to required closure by state governments. Some employers have had to terminate employees who have been with them for many years and provided severance pay in order to relieve the financial burden on those staff members. However, receiving severance pay could have an impact on unemployment payments in some states.
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What is Severance Pay?
Severance pay is usually paid to a worker who has been terminated. In most cases, severance is paid when the dismissal is not temporary. It is an agreement between you and your company which means there are no rules in the US that require you to receive any type of severance upon termination. During the Coronavirus epidemic, some companies are offering severance as a way to lessen the blow on family finances when they know they will be unable to bring the staff member back on board once this is over.
How is Severance Paid?
Severance may be paid in a lump sum or it could be paid in installments. How your severance is paid may have an impact on when you can apply for payments due to job loss. This also varies by state as each state has its own requirements related to severance payments to Americans who have lost their jobs for any reason.
Lump Sum or Installments
In some states, when you receive your severance pay in one lump sum, you can apply for and may be eligible for job loss payments immediately after you receive the money. When your employer pays the severance over time, however, some states require that you wait until the payments cease before you are eligible to apply for unemployment. There are some states that do not consider severance pay as earned wages and you are able to apply for benefits immediately.
Severance or Continuation Pay
There is a difference between severance and what is known as continuation pay. Your boss may end your employment on June 1 but continue to pay you until June 30 in order to help you prepare financially. You don’t have to report to work the entire month of June but you will receive your regular salary for the month. In most states, this would mean you are not eligible to apply for job loss payments until the continuation pay ends on June 30.
When you file for job loss payments, you will have to report income you received from your company when you left their employ. In addition, as soon as you file, your company is notified. They must file documentation of your salary and other information with the state. In that information, they will include any severance, continuation or other pay you may receive, including vacation or sick payments you will receive. They will also inform the state the last day you will receive pay from them. While you are collecting from the state, you are required to report any income you receive. In most states, payment for unused vacation or sick time will not have an impact on your job loss benefit.
As mentioned, each state treats severance pay differently. In California, you are eligible immediately after your job loss but you must report the income. In New York, if your severance is the same as your regular salary, you cannot file for job loss payments but if it is less than your regular pay, you may be able to collect the difference. In Texas and in Delaware, you can file for job loss payments when the period of coverage has expired. For example, if your severance, whether it is a lump sum or installment, is equal to three months salary, you are unable to file for job loss payments until the fourth month after your job ends.
Contact Your State Office
If you are not sure what the regulations are in your state, contact your local labor relations office. They can provide you with details on how your state handles severance, vacation and sick pay as well as continuous pay. If you are a member of a union, your union representative can also help you. It is also important to know that if your claim is denied, you have the right to an appeal. Each state has information on the appeal process available online or you can call the office to learn more.
If you have been terminated from your position and have been offered severance pay, you may want to reach out to your human resources department, union representative or state’s Department of Labor to learn what rights you may have as far as job loss benefits, job training and more assistance related to your financial future. Knowing what the requirements are in your state can keep your family economic future secure during and after the pandemic. You may also want to reach out to an employment lawyer to learn if you have additional rights in your state regarding your lay off, termination or salary reduction during this time of uncertainty.