How unemployment insurance works
Unemployment insurance is run by each state under its own rules and paid for mainly by a tax on employers. You generally qualify if you lost the job through no fault of your own, earned enough wages over roughly the past year, and are able to work and actively looking. A layoff qualifies. Being let go for poor fit usually qualifies. Quitting without good cause or being fired for misconduct usually does not. Benefits replace roughly half of your former wages up to a weekly cap that differs widely by state, and most states pay for up to twenty-six weeks.
Filing and keeping the claim
- File online with the workforce agency of the state where you worked, in the first week, because payments run from the filing date.
- Gather your employers' names, addresses and dates for the past eighteen months, along with the reason you left.
- Expect an unpaid waiting week in many states.
- Certify every week or two as your state requires, reporting your job-search contacts and any money you earned.
- Report part-time and freelance income accurately, since overpayments must be repaid and can carry penalties.
Benefits count as taxable income on your federal return, and you can ask the agency to withhold federal tax from each payment. If the claim is denied, appeal. The deadline is short, often ten to thirty days, and you should keep certifying while the appeal is pending.
What severance is
No federal law requires severance pay. It is a company policy or a negotiation, commonly one or two weeks of pay per year of service, given in exchange for your signature on a release of legal claims. Workers aged forty and over must be given at least twenty-one days to consider a release, or forty-five days in a group layoff, and seven days to revoke after signing. Beyond the amount, you can ask for employer-paid health premiums for a few months, payment for unused vacation, a later official end date, an agreed neutral reference and continued vesting. Severance is taxed as wages.
How the two interact
Some states delay or reduce unemployment benefits for the weeks your severance covers, and others ignore severance entirely. File anyway, report the severance exactly as the form asks, and let the agency rule.
Note Employers with a hundred or more workers generally owe sixty days of written notice before a mass layoff or plant closing under the federal WARN Act. If you received none, you may be owed pay for the missing notice period.
