Severance pay is money your employer pays you after you leave your job. Your employer pays you severance pay either because they want to or because they have an obligation to based on a contract you have. Severance pay can include rights toward seniority, or pension rights you have coming to you. Severance pay is designed to help you pay the bills until you can find a new job. Severance pay is not wages.
You should consult an attorney before signing any document that you agree to accept a severance package because you may be giving up your legal rights by signing this document. Many employers pay severance because they don't want to have to worry about you taking legal action against them. This certainly does not mean that all employers who pay severance did something illegal. In most cases, they did not, but want assurance they are not going to get sued, as it is expensive for them to hire a lawyer to defend them in a lawsuit.
You are allowed to receive both severance pay and unemployment. Illinois considers severance pay as money you receive for work you did during the time you were employed. Since your severance pay is not considered income, it will not usually affect your unemployment benefits.
Can my severance payments come in periodically rather than one payment?
Yes. It does not matter whether your severance payments come in periodically or in one lump- sum. As long as you no longer work for your employer, you are eligible for unemployment benefits. If you continue to do any work for your employer after termination, then the severance pay may be considered wages, which can either completely disqualify you from receiving unemployment benefits or lower the amount you are eligible to receive.
Updated: January 2017