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  • North Carolina has a very broad definition of what constitutes separation or severance pay.

    How does severance pay affect your claim for unemployment benefits with North Carolina’s Employment Security Commission?

    First of all, what is severance pay. Severance pay is the money or benefits you receive as compensation when your employer terminates your contract. Each company has different way of calculating it based on the number of years you have worked with them, your salary, your position, loyalty and dedication. Employers have no legal requirement to give you a severance pay, it is an agreement between you and your employer based on goodwill.

    However, note that the North Carolina Employment Security Commission views vacation pay, retirement incentives and severance pay as a single separation packet. Therefore, if you are given warning, you might consider using your vacation time before your employment is terminated.

    SEVERANCE IMPLICATIONS FOR UNEMPLOYED WORKERS

    NC ESC does not consider you unemployed during the period covered by your separation or severance pay . This means you cannot file your initial claim while you are receiving severance pay compensation. For instance, if your employer kindly gives you six months as compensation after your contract is terminated, you will not be able to file for unemployment until the six months have ended.

    If you want to file your unemployment claim as soon as possible you can negotiate the terms of your severance pay so it covers the minimum period possible without affecting the amount you receive.

    However, you are going to need to be creative because the NC ESC will calculate the severance period for you, if you don’t specify a period, and can provide evidence to back your claim.

    How does the NC Unemployment Office calculate your severance period?

    The NC ESC will use your average pay rate with the company to calculate the severance period. This is done by dividing your severance or separation pay by your previous rate of pay and then adjusting for the work schedule you had. For instance if you are given a $5,000 separation packet and your rate of pay was $20 an hour, your separation period would be 250 hours. If you worked 25 hours a week, your separation or severance period would be 10 weeks. In this example, the NC ESC would adjust the date your employment ended by 10 weeks.

    IMPORTANT NOTE: If you decide to retrain yourself after losing your job and register with a university, college, secondary school or some other training program approved by the NC ESC, you will be considered unemployed. In other words, you could use your severance pay towards your education expenses and start receiving unemployment benefits earlier.

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