Severance Pay and UC Benefits in Pennsylvania

UCP-41 is a pamphlet published by the Pennsylvania Office of Unemployment Compensation.  This pamphlet provides information about issues that affect eligibility for unemployment compensation (UC). It also contains information about facts that each party - employer and claimant - is responsible to establish when an issue arises.

Here is what UCP-41 says about eligibility for Unemployment Compensation when an employee is receiving severance payments:

Severance Payments

Section 404(d)(1) of the PA UC Law provides, in part, that benefits shall be paid to an otherwise eligible employee, compensation in an amount equal to his/her weekly benefit rate less the total amount of severance pay that is attributed to the week.

Severance pay in an amount greater than 40% of the average annual wage will be attributed to the weeks immediately after the claimant's separation from employment. The claimant's weekly benefit rate will be reduced for a certain number of weeks, but not to an amount less than zero. The number of weeks will depend on the amount of the severance payment and the claimant's regular full-time wage.

Clearly receiving severance payments in Pennsylvania will result in an “offset” against any anticipated UC benefit.  Employees need to consider this when structuring settlements or calculating the value of severance offered.