Can I Collect Unemployment if I Get a Severance Package in New Jersey?

In New Jersey, unemployed workers can file for unemployment benefits for up to 26 weeks. The state allows claimants to receive unemployment benefits while they are simultaneously receiving severance pay. Although severance pay does not reduce an applicant's unemployment benefits, other types of compensation paid when employment ends can reduce benefits. With the exception of severance pay, claimants must report all other income while they are receiving unemployment benefits.


Remuneration in Lieu of Notice

Remuneration in lieu of notice is a bar to unemployment benefits, and claimants who receive remuneration in lieu of notice are not eligible for unemployment benefits for those weeks. New Jersey law considers remuneration as regular income required by contract. However, if a claimant receives remuneration pay for a few days in one week, she may receive partial unemployment benefits.

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Severance Pay

Although many states consider severance pay as income, New Jersey does not. According to the New Jersey Unemployment Insurance Law, claimants receiving severance pay are eligible to receive unemployment insurance benefits. Furthermore, severance pay does not reduce benefits. However, the Department of Labor and Workforce Development conducts a case-by-case analysis to ensure the payment a claimant receives is legitimate severance pay. Generally, employers pay severance to their employees based on their total years of service. Severance pay based on past service is not included as income, and the state will not offset a claimant's benefits for severance pay.


Severance and Continuation Pay

Severance pay is a lump sum or installment payment that is not contingent upon notice. Severance pay is based on past work or services, and is not contingent upon future work. However, New Jersey considers continuation pay as income, since it is paid in periodic payments or installments as income in lieu of notice. When a claimant receives "continuation pay," and not actually "severance pay," it is considered income.

Furthermore, a claimant who receives continuation pay is not eligible for unemployment benefits. Unlike severance pay, continuation pay is a complete bar to benefits, and a claimant receiving continuation pay is still working, according to New Jersey law. Since contingent pay is a form of compensation for future services or lack thereof, the state considers it as income.


Salary Continuation Through Termination

Similar to continuation pay, salary continuation pay is considered income and is a bar to unemployment benefits. An individual receiving salary continuation through termination pay is ineligible for benefits until her payments end.


Since state laws can frequently change, do not use this information as a substitute for legal advice. Seek advice through an attorney licensed to practice law in your state.


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