How Does Severance and Vacation Pay Affect Unemployment?

If you lose your job for any reason, your financial responsibilities do not lessen. You still need to pay the bills and keep food on the table. Depending on your circumstances, you may be eligible for unemployment benefits, or you may be able to get severance pay or other resources to help you cover costs until you get a new job. However, receiving severance or other benefits can affect your unemployment.

If you are concerned about your benefits or have questions, contact Weisberg Cummings, P.C. to arrange a consultation with an attorney. Our legal team handles a variety of employment claims and benefits cases in Pennsylvania, and our attorneys have worked to help many employees get their rightful unemployment compensation. In the meantime, here is our guide on how vacation and severance pay affects unemployment in Pennsylvania.

Can You Collect Unemployment Benefits if You Are Fired in Pennsylvania?

You may be able to collect unemployment compensation even if you were fired. Pennsylvania law states that you can receive unemployment benefits if you meet the right requirements. Some of the eligibility requirements you might need to meet include:

• The unemployment is not due to your own fault
• Your past earnings meet certain requirements
• You are actively seeking employment

Typically, you are eligible to receive benefits when fired if it was for a reason other than willful misconduct. Willful misconduct is when an employee behaves in an unacceptable manner purposefully, even though the employer has warned them about their actions. It may involve willfully neglecting the company’s standards of behavior, employee obligations and duties, or the employer’s interests.

Here is a deeper look at different reasons for being fired and in which situations it might be described as willful misconduct:

• Tardiness or absenteeism: If you have a good cause for missing work like taking parental leave or caring for an ill child, it may not be willful misconduct. If your employer does fire you for this, it may be best to speak with an attorney about pregnancy or family discrimination.
• Disruptive influence: An employer might have a standard of behavior they expect employees to comply with. If you are purposely disruptive without good reason, it may be classified as willful misconduct.
• Rule violation: Similarly, violating the employer’s company rules might cause you to disqualify for unemployment benefits if you lack good reasoning for your actions.
• Damage to property or equipment: In some cases, if you were willfully negligent and damaged the company’s property or equipment, you may be unable to receive unemployment benefits.
• Drug and alcohol testing: If your employer fired you for a positive drug or alcohol test, you might be ineligible for benefits. Be sure to consult with an attorney if you believe the test was inaccurate or violated the labor agreement.
• Unsatisfactory work performance: Generally, you might still receive benefits if you worked your hardest and were still unable to meet the employer’s expectations. If the employer can prove that you willfully failed to meet standards, you might disqualify for unemployment benefits.

If you lost your job due to being laid off or your company downsized, you might be able to receive benefits since it was not due to your fault. Although, if you receive pay in lieu of notice, this might affect the benefits you receive. We’ll explore pay in lieu of notice in a deeper context later.

It is also important to remember that you may be ineligible if you quit your job. That is unless you did so for a good cause, such as health reasons, relocation, child care issues, or lack of transportation or alternative transportation. Even if you fall into any of these categories, it may only classify as a good cause if you made an effort to keep your job by looking for alternative arrangements or discussing accommodation with your employer and ended up quitting because there was no suitable solution.

How Severance Pay Affects Unemployment

Severance pay is meant to ease the burden of being unemployed. While employers do not need to pay this benefit in Pennsylvania, many choose to do so in order to keep former employees from becoming disgruntled. Severance pay can be made in one lump sum or can be paid out over time.

When you lose your job through no fault of your own, you may also qualify for unemployment insurance, which acts in much the same way: by giving you the money to pay bills and get back on your feet while you look for new employment. If you paid enough money into the unemployment compensation system and worked enough in the past year and are currently looking for work, you may be able to file for unemployment insurance.

Here’s the real question — Can you file for unemployment insurance if you get a severance?

In Pennsylvania, if you get severance pay, it may offset your unemployment insurance. Under Act 6 of 2011, workers who have severance pay over 40% of the average annual wage in the state will have their unemployment insurance offset according to a formula. In simple terms, if you get severance pay, you will get less unemployment compensation and may, in fact, get no unemployment insurance money if your severance is generous enough.

Here is an example of how this works. Let’s say you receive a severance pay in Pennsylvania of $28,000. If Pennsylvania’s median annual wage for 2024 is $65,878.80, then 40% of that amount would be $26,351.52. When you calculate the difference between your $28,000 and $26,351.52, it comes to $1,648.48, representing your deductible severance pay.

If you usually received $500 per week before you lost your employment, this is the amount you may receive for use each week for the first three weeks. After those three weeks of unemployment, you may be left with around $149. It is important to note that $500 may exceed your maximum unemployment benefit rate for the week, meaning you may be unable to receive unemployment compensation benefits for those first three weeks.

If you are still unemployed by the fourth week, you may apply for unemployment benefits, taking the $149 severance pay into consideration to determine your eligibility and the amount you may receive for the week.

How Vacation Pay Affects Unemployment Pay

Many employers offer paid vacation time. If you continue to work and do not take all your vacations and then leave your job, your employer may grant you the amount you should have been paid. According to Pennsylvania law, if your vacation pay exceeds your weekly unemployment compensation benefit amount, it may be deducted from the benefit amount during the week you take this vacation.

Still, Pennsylvania laws state that if your job loss is permanent, your unemployment benefits are not impacted by vacation pay.

Pay in Lieu of Notice

Some jobs require your employer to give you a specific amount of time of notice before firing you or laying you off. If a plant closes or a business goes out of operation, employers may not be able to give you this notice. In other cases, business owners want to terminate the employer-employee relationship for some other reason without giving due notice.

When employers do not want to wait or cannot wait, they can pay in lieu of notice, meaning they can give employees wages instead of giving them notice. In Pennsylvania, pay in lieu of notice can impact your unemployment benefits the same way severance pay and continuation of pay would impact these benefits. Some employers may even offer full benefits relating to leave and vacation. All these benefits and payments might delay your eligibility for unemployment compensation.

How to File for Unemployment Compensation Benefits

There are a few simple steps you can follow to file for compensation benefits. These include:

• Gathering personal information: You may need to provide personal information like your home address, Social Security number, email address, telephone number, direct deposit bank information and Unemployment Compensation System username and password if you’ve applied before.
• Collecting information about your separating employer: Some employer information you will need to provide includes your employer’s name, phone number and address, any severance package information, your first and last day working with the employer, and your reason for leaving.
• Choosing a filing method: Pennsylvania’s Office of Unemployment Compensation offers three primary ways to apply. You can apply over the phone, online or by a videophone service if you use American Sign Language (ASL).

When and How Often Should You Apply for Unemployment Compensation?

You’ll want to file for unemployment compensation benefits each week that you are fully or partially unemployed after your initial application. The government prefers to pay unemployed individuals by the week since they are actively seeking a new position. It is also another way to ensure they avoid paying you during any week you go on vacation. The weekly period will typically begin on a Sunday and end on a Saturday.

Should You File for Unemployment Benefits if You Have Severance Pay?

It may be a good idea to file for unemployment compensation as soon as you become unemployed, even if you receive severance pay. This is because the severance pay may be useful in helping the government determine how large or small the impact may be on your eligibility. They will also need to get in touch with your employer about your reason for leaving, making it essential for them to do so while their memory and yours are still fresh.

Where to File for Unemployment Benefits if You Had a Job in Another State

If you are a Pennsylvania resident who earned wages in one or more other states, you may need to file with one of those states. For example, working in a single other state for an entire year means you might need to file for unemployment compensation with that state. If you earned money in several states during a year, you could file a Combined Wage Claim (CWC) with one of the states you worked in or received wages from.

Denials and Appeals

If you have lost your job and are applying for unemployment and any other benefits, it is important to get the maximum benefits possible. They assist in easing your financial situation and are especially crucial when you have bills to pay and groceries to buy. Unemployment compensation, severance and other benefits exist to help you.

To get unemployment benefits, you will need to apply. When you do, you will be asked to list all money and sources of income, including pensions and other benefits. If your claim is denied or offset in a way you feel may be in error, you may wish to consult with a benefits attorney. In cases where a mistake was made or in situations where you have been denied benefits, an attorney can work to help you seek your rightful benefits.

Contact Us for a Free Consultation

If you feel you are not getting your rightful benefits or if you have been denied or have questions about unemployment benefits, contact Weisberg Cummings, P.C. for a consultation with an attorney. Our legal team has more than 40 years of combined experience, and we work hard to bring you personalized and responsive representation.

Our attorneys contact you, keep you up-to-date about your case and answer your questions. We understand it can be challenging to be worried about benefits and employment, which is why we work to get to know you and your concerns so we can address the issues that matter to you. Contact our law firm today to learn how we can help.