Does Severance Pay Affect Your Unemployment Claim in New Jersey?
When a worker in New Jersey is terminated from employment through no fault of his own, he may qualify for certain benefits. An employer may award a terminated employee a severance package, while New Jersey‘s state government may award a terminated employee unemployment benefits. The receipt of a severance package could affect the employee’s ability to receive unemployment benefits. Whether the worker can receive unemployment benefits with a severance package depends on the type of severance awarded.
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Unemployment Benefits
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A worker qualifies for unemployment benefits in New Jersey if he worked at least 20 weeks during the base period or if he earned at least $7,300 during the base period. Fifty-two weeks make up the base period. If the worker does not qualify for unemployment benefits for work done during the base period, the state will look at the alternate base period to determine if he qualifies to receive unemployment benefits. In the alternate base period, the employee must have worked at least 20 weeks or earned $7,300 within the previous 18 months. The alternate base period actually combines two base periods to help a worker qualify to receive unemployment benefits.
Severance Pay
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New Jersey employers do not have a mandate placed upon them to award severance packages to terminated employees. An employer may award a severance package to an employee who has been terminated by entering into an agreement with that employee or with that employee’s representative. Employers may use severance packages to boost the morale of laid-off workers. The amount that an employer pays out in a severance package varies widely. Generally, a newly unemployed worker will receive one week’s salary for every year he worked as the business’ employee.
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Types of Severance Packages
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Severance pay can either come in the form of a lump sum or several payments. If the worker receives his severance package via several payments, that means he continues collecting a paycheck as if he were still employed. The worker who elects to take his severance as several payments as opposed to a lump sum may even be able to keep contributing to his 401(k) and maintain his health insurance with the company until the severance pay runs out.
Severance Could Affect Unemployment
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In New Jersey, the worker who takes his severance pay as a lump sum can still apply for and receive unemployment benefits. Taking severance pay in several payments may affect the worker’s unemployment benefits, however. Salary continuation through termination and payments in lieu of notice may prevent a worker from receiving unemployment benefits in New Jersey. If it appears that a worker continues receiving payment after his last day at work, a representative of the state may need to interview that worker to determine if he qualifies to receive unemployment benefits.
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