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Can You Get Severance and Unemployment in Texas? What Employees Need to Know

Losing a job often comes with a lot of uncertainty—especially when money is involved. If your employer offers severance pay, you may wonder whether that means you cannot also receive unemployment benefits.

A common question Texas employees ask is:
“Can I get severance and unemployment at the same time?”

In Texas, the answer is sometimes yes, sometimes no. It depends on how the severance is structured and how the Texas Workforce Commission (TWC) views the payment.

This article explains how severance and unemployment interact under Texas law and what employees should understand before making assumptions.

What Is Severance Pay?

Severance pay is money an employer provides after employment ends. In Texas, employers are not required to offer severance. When they do, it is usually tied to a severance agreement or company policy.

Severance may be paid as:

• A lump-sum payment

• Continued pay over several weeks

• Payment based on years of service

• A combination of wages and benefits

Severance is often given in exchange for the employee signing a release of legal claims.

How Unemployment Works in Texas

Unemployment benefits in Texas are administered by the Texas Workforce Commission (TWC) and are intended for workers who lose their jobs through no fault of their own.

To qualify, you generally must:

• Have earned enough wages during the base period

• Be unemployed or working reduced hours

• Be available and actively seeking work

• Not have been terminated for misconduct

Receiving severance does not automatically disqualify you from unemployment—but it can affect timing.

How Severance Affects Unemployment Benefits

The key factor is how the severance is paid.

Lump-Sum Severance

If you receive severance as a one-time lump-sum payment, the TWC may consider that payment as wages for a specific period.

This can result in:

• A delay in when unemployment benefits begin

• Temporary reduction or postponement of payments

Once the severance period is exhausted, you may still qualify for unemployment benefits.

Ongoing Severance Payments

If severance is paid as continued wages over time, the TWC often treats it like regular pay.

In that case:

• You may not be considered “unemployed” during the payment period

• Unemployment benefits may be denied or delayed until payments end

Does Signing a Severance Agreement Affect Unemployment?

Signing a severance agreement does not automatically eliminate your right to unemployment.

However, the agreement may:

• Define the severance as continued wages

• Affect the timing of benefit eligibility

• Include language that the employer may use to contest your claim

The wording of the agreement matters.

What If the Employer Challenges Unemployment?

Employers often challenge unemployment claims to avoid increased taxes. A challenge does not mean you will lose.

The TWC will look at:

• Why your employment ended

• Whether misconduct occurred

• How severance was paid

• Documentation from both sides

Many employees still qualify even when employers object.

Can You Receive Unemployment After the Severance Runs Out?

Yes, in many cases.

If your severance is treated as wages for a limited period, you may qualify for unemployment after that period ends, as long as you meet other eligibility requirements.

What About Quitting or Being Laid Off?

Severance is more common in layoffs or position eliminations. Employees laid off for economic reasons are often eligible for unemployment.

If you resigned, eligibility depends on whether you had good cause connected to the work, such as:

• Unsafe working conditions

• Medical reasons

• Significant changes to job duties or pay

• Constructive discharge

Each situation is evaluated individually.

What Employees Should Do After a Layoff

If you receive severance and want to apply for unemployment:

• Read your severance agreement carefully

• Apply for unemployment as soon as possible

• Accurately report severance payments

• Keep documentation of how severance is paid

• Appeal if your claim is denied

Many denials are reversed on appeal.

When Legal Guidance Can Help

It may be helpful to seek legal guidance if:

• Your severance agreement is unclear

• The employer is mischaracterizing the separation

• You believe the employer is falsely claiming misconduct

• You were pressured to resign

• You are unsure how severance affects your benefits

Understanding your rights before signing documents can prevent costly mistakes.

Final Takeaway

In Texas, receiving severance does not automatically disqualify you from unemployment benefits. However, severance can affect when benefits begin and how the TWC evaluates your claim.

The most important factors are the structure of the severance and the reason your job ended. Knowing these details can help you plan ahead and avoid surprises during an already stressful time.