Severance Pay Calculator
Estimate your severance package using the formula employers actually use: weeks of pay per year of service. See your realistic range from baseline to executive-level offers — plus what else belongs in the package and how to negotiate it.
Quick answer: Severance ≈ (annual salary ÷ 52) × weeks per year of service × years served. The common convention is 1–2 weeks per year: six years at $80,000 with two weeks per year is $1,538 × 12 weeks ≈ $18,500. US law doesn't require severance — it's policy, contract, or negotiation.
How Severance Pay Works
Severance is a parting payment when employment ends through no fault of yours — layoffs, restructurings, position eliminations. In the US it is almost never legally required: no federal statute mandates it (the WARN Act requires 60 days notice of mass layoffs at large employers, or pay in lieu). It exists because employers want two things: goodwill/reputation, and your signature on a release of legal claims. That release is why severance is genuinely negotiable — they are buying something from you.
Severance Pay Formula
Severance = (Annual Salary ÷ 52) × Weeks per Year × Years of Service
One to two weeks per year of service is the dominant convention; three to four appears at senior levels and in generous tech packages. Many employers cap totals (often 26 weeks) and set floors (minimum 2–4 weeks regardless of tenure).
Worked Examples
Example 1 — mid-career layoff. Alex, $80,000/year, 6 years, 2 weeks/year: $1,538 × 12 = $18,462 (12 weeks of runway).
Example 2 — short tenure with floor. Priya, 1.5 years at $65,000, policy of 1 week/year with a 4-week minimum: floor applies → 4 × $1,250 = $5,000.
Example 3 — UK statutory redundancy. Tom, 45 years old, 8 full years at £30,000: UK statutory redundancy pays age-weighted weeks (1.5/week for years worked over age 41, 1 for 22–40) on capped weekly pay — his statutory minimum is several weeks of capped pay, and his contract may add more. The UK, unlike the US, has a legal floor after two years of service.
Severance Conventions by Level
| Level | Typical formula | Typical extras |
|---|---|---|
| Hourly / junior | 1–2 weeks flat, or 1 week/year | Sometimes none |
| Professional / manager | 2 weeks/year, 4-week floor | COBRA months, outplacement |
| Senior leadership | 3–4 weeks/year or fixed 3–6 months | Bonus proration, equity acceleration |
| Executive (contract) | 6–24 months per employment agreement | Full package defined in contract |
The Full Package: What to Count Beyond the Check
- Unused PTO payout — separate from severance and legally required in many states; compute it with the PTO payout calculator and confirm it's added to, not folded into, the offer.
- Health coverage: employer-paid COBRA premiums for 1–6 months is standard at professional levels — worth $500–2,000/month, often easier to win than more cash.
- Bonus/commission proration for the months worked — check plan documents for "must be employed on payment date" clauses, which are negotiable in a layoff.
- Equity: unvested shares normally lapse, but acceleration or an extended exercise window is negotiable — critical near a vesting cliff.
- References and non-disparagement — costless to the employer, valuable to you; get the agreed reference language into the agreement.
- Final wages themselves — every hour worked plus OT is owed regardless of any agreement; verify with the final paycheck calculator.
Negotiating Severance: Leverage and Sequence
- Don't sign on the spot. You're typically given 21 days to consider a release (45 in group layoffs, for employees over 40 under US ADEA rules) — use the time.
- Anchor on tenure and impact: "Given six years and X, I was expecting the two-weeks-per-year end of the range" is a normal, safe ask.
- Trade across categories: if cash is fixed, ask for COBRA months, a later termination date (extends vesting and benefits), outplacement swapped for cash, or prorated bonus.
- Mention (don't threaten) legal review: "I'll have counsel look over the release" alone often improves offers where claims risk exists.
- Get the math itemized in writing — severance, PTO payout, bonus, and benefits as separate lines, so nothing quietly absorbs anything else.
Tax and Unemployment Interactions
Severance is supplemental wages: typically 22% flat federal withholding plus FICA and state tax — expect roughly a third withheld, reconciled at filing. Unemployment benefits interact by state: some states delay benefits until the severance-covered weeks end (especially salary-continuation style payouts), others pay both concurrently (lump sums often treated more favorably). File for unemployment immediately regardless — eligibility dates from filing, and the worst case is a short postponement.
Red Flags in Severance Agreements
- Overbroad non-competes smuggled into the release — negotiate scope/duration or extra pay for them.
- Clawback-on-breach clauses tied to vague obligations (broad confidentiality or non-disparagement) — ask for materiality qualifiers.
- Waiver of earned wages, PTO, or vested benefits — earned amounts are owed independent of any release; a release conditioning them is improper in most states.
- "Payment in lieu of WARN notice" mislabeled as generosity — if WARN applies, those 60 days were already owed.
Frequently Asked Questions
How is severance pay calculated?
The standard convention is one to two weeks of pay per year of service: (annual salary ÷ 52) × weeks × years. Six years at $80,000 with two weeks per year is about $18,500.
Is severance pay required by law?
Not in the US — it is policy, contract, or negotiation, though the WARN Act requires 60 days notice or pay for mass layoffs at 100+ employee firms. The UK mandates statutory redundancy pay after two years; India's Industrial Disputes Act requires retrenchment compensation (15 days per year) for covered workers.
How is severance taxed?
As supplemental wages: typically 22% flat federal withholding plus FICA and state tax — roughly a third withheld. True tax reconciles at annual filing.
Can I negotiate severance?
Usually yes. Employers want a signed release of claims, which is your leverage. Tenure, seniority, claims risk, and layoff circumstances all strengthen the ask; 21-day consideration windows give you time.
Does severance affect unemployment benefits?
State-dependent: some delay benefits until severance weeks end, others pay both. Lump sums are often treated more favorably than salary continuation. File immediately either way.
What is a good severance package?
Two weeks per year of service plus employer-paid COBRA months, prorated bonus, and outplacement is a solid professional-level package. Executives typically have contractual 6–24 month terms.
Do I have to sign a release to get severance?
Almost always — the release of claims is what the employer is buying. You are entitled to earned wages and (in many states) PTO payout regardless of signing.
How long do I have to consider a severance agreement?
US employees over 40 must get 21 days (45 in group layoffs) and 7 days to revoke after signing under the ADEA. Others get whatever the offer states — ask for time; it is routinely granted.
Is severance paid as a lump sum or installments?
Either. Lump sums give certainty and cleaner unemployment treatment in many states; salary continuation may extend benefits eligibility. The agreement controls — read which you are getting.
What happens to my bonus and unvested equity in a layoff?
Plan documents control, but both are negotiable: prorated bonus for months worked is a common ask, as is vesting acceleration or an extended option exercise window near a cliff.
✓ Formula verified • Last updated: July 9, 2026