Illinois unemployment compensation is determined by the Illinois unemployment laws, enforced by the Illinois Department of Employment Security (IDES). One of the subjects those laws cover is severance pay and whether these payments made by your former employer can affect your unemployment payments. Many states bar you from collecting both at the same time, but Illinois is a little different.
Severance pay is compensation your employer gives you when it initiates your job separation. The purpose is to help you adjust to the sudden lack of employment. Usually, the severance pay is a function of your salary and/or years with the company. So someone who has worked there longer or made more money would receive more severance than someone who did not. The presence of severance pay implies that the job separation was amicable and not a result of any of your actions.
Effect on Illinois Unemployment
Many states do not allow you to receive severance pay and unemployment compensation at the same time. They see it as a double payment and disqualify you for unemployment until your severance pay runs out. However, Illinois is not one of those states. Severance pay has no effect on your unemployment benefits from the IDES.
How to Tell the Difference
There are several type of separation compensation, so it's easy to get them mixed up. For example, claimants often mistake wages in lieu of notice or residual payments as severance pay. Illinois considers all payments made to a former employee for past service rendered or for pension, seniority or benefits lost due to the separation. It doesn't matter if the law requires the payments or if they're voluntary. It also doesn't matter if you receive the payments in one lump sum or in increments. If you are unsure of whether your payments are severance pay, the IDES can help you determine the nature of the compensation.
Do You Have to Report It?
When you first apply for unemployment benefits with the IDES, the initial application asks you about any income you may receive from your employer, including separation pay. This is just for informational purposes, but you must report any severance you're receiving. This is the last time you'll have to report your severance pay because it's not required during your weekly claim certifications. None of the verification questions during the certification process asks whether you've received severance pay for the week in question. This is true for both the online system and the telephone system.
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