Can You Accept a Severance Package & Unemployment in Michigan?

The Michigan Unemployment Insurance Agency within the Department of Licensing and Regulatory Affairs administers the state's unemployment insurance program. At the time of publication, unemployed or partially unemployed applicants can receive benefits for 14 to 26 weeks and qualify for further extensions. Under Michigan law, claimants who receive any type of remuneration, including severance pay, must report their compensation to the Michigan Unemployment Insurance Agency. Severance pay, in addition to other types of earnings, may reduce a claimant's weekly benefit allowance.

Overview

The Michigan Unemployment Insurance Agency determines eligibility pursuant to the Michigan Employment Security Act. Michigan employers pay unemployment taxes based on their total payrolls. Claimants unemployed through no fault of their own or experience scheduling reductions can qualify for unemployment insurance benefits if they agree to register for work, look for full-time work and accept suitable employment offers. During the economic recession beginning in 2008, Michigan qualified for extended federal-state unemployment benefits through the U.S. Department of Labor as a high unemployment rate jurisdiction. As a result, eligible claimants who exhausted their state benefits qualified for extended federal-state benefits.

Severance Pay and Michigan Employment Security Act

Unemployment insurance claimants in Michigan are required to report any type of income or remuneration they receive while simultaneously receiving unemployment insurance benefits. According to the Michigan Employment Security Act, severance pay will reduce a claimant's weekly benefits in most situations. However, severance pay does not factor into an applicant's initial weekly benefit calculation, since under the Employment Security Act, severance pay does not count as wages. In other words, the Michigan Unemployment Insurance Agency will not use severance pay when establishing a claimant's weekly benefit allowance, but severance pay may reduce an applicant's actual weekly pay during the weeks he receives severance.

Severance Pay and Unemployment Benefits

Severance pay reductions occur only during weeks in which employers actually make their severance payments. Severance pay will reduce a claimant's weekly unemployment benefit check during the weeks in which an employer allocated the payment. If an employer does not allocate severance pay to specific weeks and makes a lump-sum payment, the severance pay may reduce an applicant's benefits during the weeks in which she receives severance pay.

Calculating Severance Pay and Unemployment Benefit Reduction

If an employee's severance pay for any given week is equal to or greater than 1.5 times his weekly unemployment benefit check, he is not entitled to receive an unemployment benefit check for that week. If his severance check is less than 1.5 times his weekly unemployment benefit check but more than his weekly benefit check, the agency will subtract his severance pay from 1.5 times his weekly unemployment benefit check. Furthermore, he will have one less week to claim unemployment benefits. If an employee's severance pay equals his weekly benefit check or is less than his check, the agency subtracts 50 percent of his severance pay from his weekly unemployment allowance.

References

• Michigan Unemployment Insurance Agency: Claiming Unemployment Benefits in Michigan
• Michigan Unemployment Insurance Agency: Unemployment Benefits in Michigan Handbook for Unemployed Workers
• Michigan Unemployment Insurance Agency: Employer Frequently Asked Questions
• Michigan Unemployment Insurance Agency: How Severance Pay Affects Unemployment Benefits

Resources

• Michigan Unemployment Insurance Agency: Claimant Guide to Unemployment Benefits (Employed Filed Claims)