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Contact the Employment Development Department as soon as you're unemployed.
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Terminology matters but interpreting the terminology matters more. A severance package with a cash payment or periodic payments may delay or decrease your unemployment benefits. In California, if the payment is “severance,” it doesn’t count against your unemployment benefits. If the payment is “wages in lieu of notice,” it counts as wage-continuation pay and the California Employment Development Department (EDD) subtracts the weekly amount from your unemployment compensation benefits.
How It Works
California employers pay taxes to cover unemployment benefits. Because the contribution rate for unemployment taxes varies with benefits paid to former employees, the employer's taxes increase when employees receive benefits. It works to the employer’s advantage to keep unemployment claims low and claim any payment at the end of employment as wage-continuation pay or as wages in lieu of notice. Severance pay doesn’t give the employer any advantage with EDD beyond being fair to the employee.
Reporting
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What you think is severance pay may be wage-continuation pay or wages in lieu of notice. Report all income you expect to receive from your former employer, as wages count when earned, not when received. Include holiday pay, vacation pay, bonuses, pensions, wages in lieu of notice, salary continuation and other types of payments so EDD can decide which payments affect your unemployment compensation benefits. You don’t want to pay back unemployment benefits erroneously received, so let EDD