When you receive severance pay as your employer terminates you, the Connecticut Department of Labor (CTDOL) doesn't automatically disqualify you from unemployment benefits. Instead, the agency treats that pay as income and uses the state's formula to calculate how much, if any, unemployment payments you're still entitled to. After your severance pay runs out, you begin collecting normal payments. As long as you report your severance pay during the unemployment claims process, you'll receive the correct amount. However, if you conceal your severance pay so you can collect more unemployment, you'll face stiff penalties from the Connecticut government.
When your employer offers you severance pay, it's to offset the fact that you're losing your job. By offering you a few extra weeks of salary payments, your employer hopes to soften the blow of termination. When you get your last paycheck from the employer, it will have additional weeks of income on it above what you earned through work.
Reporting Severance Pay
When you make your claim to the CTDOL, you must report your severance pay. The reason is that severance pay is still considered income. Although collecting income doesn't disqualify you from Connecticut unemployment benefits, it may change your eligibility. During your initial application process, you must answer the question about severance pay truthfully and explain how much money you receive from. Afterward, when you file your weekly claim, you must note any weeks you've earned severance pay. The CTDOL will calculate your eligibility depending on your answers.
Calculating Partial Payments
If you earn severance pay a week in which you're also eligible for Connecticut unemployment benefits, you can still collect partial benefits. To determine how much your unemployment payment should be, the CTDOL takes two-thirds of your severance pay before any deductions such as taxes. They then subtract the result from your normal weekly payment. You receive the rest, if any, as a payment. When your severance pay runs out, your unemployment benefits stop being partial payments.
Failure to Report
If you don't report your severance pay, you are committing insurance fraud. The CTDOL verifies with your employer at the beginning of your claim and does random audits of files through your benefit year. If you are ever found withholding, concealing or misrepresenting information about your income, you can face severe penalties. Connecticut punishes this crime by forcing you to repay your benefits back and penalizing you up to an 39 additional benefit weeks. This means that the next time you qualify for unemployment, you have to serve these weeks with no payment. In some cases, you can receive fines of up to $5,000 and between one and five years of jail time.
- CTDOL: Filing an Unemployment Claim
- U.S. Department of Labor. "Severance Pay." Accessed Aug. 16, 2020.
- U.S. Department of Labor. "Wages and the Fair Labor Standards Act." Accessed Aug. 16, 2020.
- NBC News. "While Sears executives get $25 million in bonuses, laid-off workers struggle during Christmastime." Accessed Aug. 16, 2020.
- New York State Department of Labor. "Dismissal or Severance Pay and Your Unemployment Insurance Benefit." Accessed Aug. 16, 2020.
Michaele Curtis began writing professionally in 2001. As a freelance writer for the Centers for Disease Control, Nationwide Insurance and AT&T Interactive, her work has appeared in "Insurance Today," "Mobiles and PDAs" and "Curve Magazine." Curtis holds a Bachelor of Arts in communication from Louisiana State University.