Some workers in New Jersey and Pennsylvania receive severance packages when they are laid off from their jobs. If you received a severance package from your former employer, you might wonder whether you will be able to collect unemployment benefits. The attorneys at Swartz Swidler can review your situation and discuss your rights with you.
What is severance pay?
Severance pay is typically given to workers by their employers as a lump-sum payment at the time that they are terminated from their jobs. While employers are not required to give severance pay to their departing employees after a layoff, some choose to do so in order to maintain goodwill. While severance pay helps to cushion the blow of being separated from your job, you will want to understand how it works so that you can be financially prepared. When you receive a severance package, you will have to pay taxes on it. The taxes that you might have to pay might be higher than the taxes that are normally taken from your paychecks. Severance pay might also have an impact on your ability to receive unemployment compensation and might delay or reduce the amount that you might receive.
Effect of severance pay on unemployment
Severance pay is treated differently in different states. Whether your severance package will impact your unemployment benefits will depend on the law in your state. In New Jersey, severance pay that is given as a lump sum generally will not affect your unemployment benefits since it is not considered to be an extension of your employment. However, if your employer pays you severance pay in installments, it might be viewed as an extension of employment and delay your ability to receive unemployment benefits.
In Pennsylvania, severance pay might reduce your benefits. If your severance package exceeds 40% of the average annual wage of Pennsylvania, the amount of your severance pay will be deducted from your weekly unemployment benefits. The deductible amount of your severance pay will be subtracted from the weeks of your unemployment benefits that immediately follow your termination date.
If you are unsure about how your severance pay might impact your eligibility for unemployment benefits, you can talk to the department of labor in your state to find out if you qualify. Even if your severance pay will not be subtracted from your unemployment benefits, you must still report the amount that you received and pay taxes on it. You should report your severance payment at the time that you file your unemployment benefits claim.
Payment in lieu of notice
A payment in lieu of notice is a wage payment that is paid by an employer to an employee who is laid off without receiving advance notification of a layoff as required by law. Since payments in lieu of notice are wages, they are considered to be extensions of employment and will delay your eligibility for unemployment benefits during the period that you receive them. If you receive a payment for unused vacation or leave benefits when you leave your job, that payment might also have an impact on your unemployment benefits. You will want to talk to the unemployment office in your state to learn about its rules.
If you receive a lump-sum payment for your unused vacation time when you are terminated, it will likely not decrease your unemployment benefits. However, if your employer pays you ongoing vacation payments during your period of unemployment, the ongoing payments will likely be deducted from your unemployment benefits. If you are laid off from your job but have an established date when you will return to work, you will likely have your benefits reduced if you use your vacation pay during your unemployment period.
Filing your claim
Even if you have received a severance package, you should go ahead and file your claim for benefits. Make sure to report your severance payment at the time that you file. Getting your claim filed promptly can help you to make sure you receive the maximum amount of benefits for which you are eligible. The unemployment office will calculate the amount of your benefits for you once you file your claim.
Appealing a denial
If your state’s unemployment agency denies your claim or your former employer contests it, you will have the right to file an appeal of the denial. Since appeals can be complex, it is a good idea for you to get help from an experienced employment lawyer for your appeal. Contact Swartz Swidler today by calling us at 856.685.7420.