Can You Collect Unemployment With Severance Pay in Maryland?

In Maryland, you can collect unemployment while receiving severance pay, and in most layoffs the severance will not reduce your weekly benefit at all. The rule that decides it is narrow and specific: severance is deductible from unemployment benefits only when your former position has not been eliminated.¹ If your job was cut in a layoff, downsizing, or restructuring, your severance and your unemployment run on separate tracks.

When Severance Does Not Count Against Your Benefits

Most people asking this question were let go because the employer eliminated the role. That is exactly the situation the regulation carves out. When the position is gone, severance pay does not offset your weekly unemployment check, whether you took it as a lump sum or you are receiving it in installments over several months.¹

The deduction rule kicks in only in narrower scenarios. Two common ones: you were separated but the employer hired someone else into your same role, or you accepted severance under a voluntary separation program where the position continues to exist. In those cases the Maryland Department of Labor will allocate the severance to weeks after your separation and reduce your benefits.

How Maryland Allocates Severance When It Is Deductible

If your position was not eliminated, the Department of Labor uses a set formula. The agency divides your last weekly wage by seven to get a daily wage, then divides the total severance by that daily wage to find how many days the severance covers. Those days are counted forward from your last day of work.¹

The comparison that decides your check is week by week. If the allocated severance for a given week equals or exceeds your weekly unemployment benefit, you get nothing that week. If it falls below your weekly benefit, you get the difference. Say your weekly benefit is $400 and your allocated severance works out to $300 per week. You would collect $100 for each week in the allocation period, then step up to the full $400 once the severance runs out.

Vacation and Holiday Payouts Follow a Different Rule

Payouts for unused vacation or holiday time often show up in the same final check as severance, but Maryland handles them under a separate regulation. Vacation and holiday pay is deducted from unemployment only if the employer notified you of a definite return-to-work date on or before the date of your layoff.² That fits temporary shutdowns and seasonal recalls, not a permanent layoff.

If you were permanently separated with no return date, the vacation payout is attributed to the weeks the employer designates or the weeks it was paid, and it does not get spread across your whole claim. When it is deductible and comes in under your weekly benefit, it is treated as partial earnings and shaves the check by a corresponding amount.²

You Still Have to Report the Severance

Reporting is separate from whether the payment reduces your benefits. When you file your initial claim, list every payment from your former employer: severance, vacation and holiday payouts, bonuses, back pay, and any pay in lieu of notice. If more payments arrive after you file, call a Department of Labor claims agent and report them.³ The agency reviews each situation and applies the position-elimination rule and the allocation formula before deciding what, if anything, comes out of your check.

Leaving payments off the claim is what causes trouble. Maryland treats intentional omissions as fraud. Consequences include repayment of all benefits received, a 15 percent penalty on top of the overpayment, monthly interest of 1.5 percent, disqualification from benefits for at least one year, and criminal penalties including a fine of up to $1,000 or up to 90 days of imprisonment.⁴

Do You Otherwise Qualify?

Severance treatment is only half the picture. You still have to meet Maryland’s standard eligibility rules: unemployed through no fault of your own, able and available for work, and actively looking for a new job.⁵

There is also an earnings threshold. You need at least $1,176.01 in wages during one quarter of your base period and a minimum of $1,800 spread over at least two quarters. The base period is generally the first four of the last five completed calendar quarters before you file, and Maryland uses an alternate base period that can reach back up to 18 months.⁵

What Your Weekly Benefit Will Be

Your weekly benefit amount is one twenty-fourth of your earnings in the highest-paid quarter of your base period. The minimum is $50 and the maximum is $430 for 2026. Regular benefits run for up to 26 weeks.⁶ Knowing this number matters even if you expect no offset, because it is the figure the severance would be measured against if the Department of Labor ever concluded your position was not eliminated.

Language in the Severance Agreement That Scares People Out of Filing

Read the agreement before you sign, but do not let it talk you out of unemployment. A legitimate severance agreement cannot require you to waive your rights to unemployment benefits, workers’ compensation, vested retirement benefits under ERISA, or COBRA continuation coverage.⁷ If the document contains language suggesting you cannot apply for unemployment, that provision is unenforceable. People read it, believe it, and walk away from months of benefits they were entitled to collect.

What the agreement usually does waive is your right to sue over the employment or termination itself, including claims under Title VII, the Americans with Disabilities Act, and the Age Discrimination in Employment Act. If you are 40 or older, the Older Workers Benefit Protection Act requires the employer to give you at least 21 days to consider the agreement and 7 days after signing to revoke it. The agreement must name the Age Discrimination in Employment Act and advise you in writing to consult an attorney. A waiver missing any of these pieces is invalid.⁷

Appealing a Denial or Reduction

If the Department of Labor decides your severance disqualifies you or cuts your weekly amount and you think that is wrong, you have 15 days from the date the determination was mailed to appeal.⁸ The clock runs from the mailing date, not the day the letter reaches you. A hearing examiner may extend the deadline for good cause, but do not count on it.

At the hearing, both you and your former employer can present evidence and testimony under oath. The point you want to prove is that the position was eliminated. Useful documents include a WARN Act notice, an internal layoff announcement, an org chart showing the role removed, or evidence that no one was hired to replace you. The hearing examiner issues a written decision with findings of fact and legal conclusions. From there you can appeal to the Board of Appeals and, ultimately, to the courts.

1
Cornell Law School. Maryland Code of Regulations 09.32.02.13 – Severance Pay, Dismissal Pay, or Pay Instead of Notice of Termination
2
Library of Maryland Regulations. Code of Maryland Regulations – .11 Holiday Pay or Vacation Pay
3
Maryland Department of Labor. Federal Employees – Frequently Asked Questions About Unemployment Insurance
4
Maryland Department of Labor. Unemployment Insurance Fraud and Identity Theft
5
Maryland Department of Labor. Do I Qualify for Unemployment Insurance Benefits?
6
Maryland Department of Labor. Division of Unemployment Insurance
7
U.S. Equal Employment Opportunity Commission. Q&A – Understanding Waivers of Discrimination Claims in Employee Severance Agreements
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Maryland Department of Labor. Unemployment Insurance Appeals