Does Severance Pay Keep You From Collecting Unemployment in Massachusetts?

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If you lose your job in Massachusetts, your employer may offer you a severance package. Since most severance packages include temporary income, they typically prevent you from claiming unemployment insurance compensation until you are no longer receiving payments from your employer. However, a few exceptions to this rule exist.

About Severance Pay

Severance pay is a temporary wage your employer offers you when he releases you from employment. Employers typically use severance packages, which may also include short-term health insurance coverage and other temporary benefits, to prevent employees from filing lawsuits against them and to protect the reputation of the company. If your employer offers you severance pay, you may receive it in a lump sum or over a period of weeks or months after you leave your job.

Effect on Unemployment

Since Massachusetts considers most severance pay to be income, receiving it typically prevents you from qualifying for unemployment insurance compensation. If you are collecting severance pay weekly after leaving your job, you must typically wait until the first week you are no longer receiving it to file an unemployment claim. If you collect severance pay in a lump sum, Massachusetts prorates the income to determine when you can begin receiving unemployment benefits.

Exceptions

If you are receiving severance pay because of a designated plant closing, you may be able to file for unemployment compensation at the same time. Massachusetts will designate a plant closing when an employer lays off more than 50 workers from one location in a six-month period and reduces his workforce by at least 50 percent. You may also be able to receive severance pay and unemployment compensation at the same time if you signed a release of claims form when you agreed to your severance package.

Considerations

Though you can't claim unemployment insurance benefits while you receive most types of severance pay, receiving severance pay won't typically decrease your unemployment benefits or reduce the amount of weeks you can collect after you are no longer receiving income from your employer. For example, if you receive six weeks of severance pay, Massachusetts delays the starting date of your benefit year by six weeks so that you can receive unemployment insurance compensation for the same amount of time that you would have if you didn't receive severance pay.

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