Severance pay is a cash payment some employers offer their workers when they retire or are laid off, resign or even fired. It is usually paid as a lump sum together with the pending wages, vacation pay, commissions and bonuses still owed to the worker. In some cases, the severance pay can be spread out for a longer period and include other benefits besides cash, such as temporary health insurance coverage after the employment is terminated. The Department of Labor of the state of Illinois publishes guidelines on the rights and responsibilities of employers and employees with respect to severance pay.

Severance Pay Law

In Illinois, no law requires employers to give workers a severance package regardless of why their employment is terminated. However, if it is a custom for your company to pay severance packages to employees and you are not offered it because of discrimination based on sex, race, religion or nationality, you may have grounds to demand it under the discrimination laws of the state of Illinois.

Holiday and Vacation Pay

The Illinois Wage Payment and Collection Act requires employers to give workers any pending vacation pay when they are terminated. You are entitled to financial compensation for vacation days you have earned during your employment period whether you quit or were laid off or fired. Holiday pay is a different matter. Although many employers include the payment of holidays in their severance packages, they are not bound by the Illinois employment law to do so.

Severance Packages and Employment Policies

Although Illinois does not require employers to pay severance packages, it does require employers to meet their contractual agreements. Therefore, if your employment contract includes the provision for a severance package, you are entitled to it. Some companies may refer in contracts to their company policy as a reference for the benefits and payments employees are eligible for at termination. If your company has a company policy, read it and compare it to the benefits and payments you receive at termination.

Severance Packages and Unemployment Benefits

Some companies offer severance packages to workers who agree to resign or promise not to take legal action against the company. Seek the counsel of an employment lawyer before signing any documents you do not understand. Only unemployed workers who lose their job due to no fault of their own are eligible for unemployment benefits under Illinois employment security rules. You may be disqualified from unemployment benefits if it looks like you resigned from your job and the Illinois Department of Employment Security determines you quit voluntarily.