Severance Pay Calculator
Estimate a severance offer with the standard weeks-per-year-of-service formula — and sanity-check one you've received.
Estimate only — severance is set by employer policy or negotiation, not by federal law.
The standard severance formula
The dominant U.S. convention is one to two weeks of pay per year of service, sometimes on top of a flat base (e.g., “4 weeks plus one week per year”). Executives with employment agreements often see 3–4 weeks per year or fixed multi-month packages.
Worked example
$65,000 salary, 6 years of service, 1 week per year: weekly pay $1,250 × 6 weeks = $7,500 gross — about 1.4 months of income to bridge a job search.
What the law actually requires
- No federal law requires severance pay. It comes from company policy, an employment contract, or a negotiated separation agreement in exchange for a release of claims.
- The WARN Act requires 60 days’ notice (not severance) for mass layoffs/closures at employers with 100+ employees — pay in lieu of notice often functions like severance when notice isn’t given.
- Earned wages are separate and mandatory: your final paycheck and — in states like California, Colorado and Illinois — accrued unused PTO must be paid regardless of any severance deal.
- You typically sign a release (waiving legal claims) to receive severance; workers over 40 get 21–45 days to consider and 7 days to revoke under the ADEA/OWBPA.
How severance is taxed
Severance is ordinary wages: subject to Social Security/Medicare and income tax. As a lump sum it’s usually withheld as “supplemental wages” at a flat 22% federal rate (37% above $1M) plus state rates — which can over- or under-withhold versus your true bracket; it settles at tax time.
Negotiation levers that actually move
- More weeks (especially if you're near a tenure milestone), COBRA premium coverage for several months, a later termination date (extends benefits and vesting), outplacement services, a neutral reference letter, and prorated bonus. Everything in a separation agreement is negotiable before you sign.
Frequently asked questions
How many weeks of severance is normal?
One week per year of service is the most common baseline; two weeks per year is a strong package. Large-company layoff packages in recent years have often landed around 8–16 weeks minimum regardless of tenure, plus a per-year component.
Does severance stop unemployment benefits?
State-dependent. In many states a lump-sum severance doesn’t block benefits, but severance paid as salary continuation can delay them until it ends. File promptly either way — eligibility is decided by the state, not your employer.
Is severance taxed at a higher rate?
No — it’s taxed as ordinary income. The flat 22% supplemental withholding on lump sums is just withholding, not your final tax; any difference reconciles on your return.
Can I negotiate after receiving a severance offer?
Yes, and the deadline to sign (21–45 days for workers 40+) is your negotiation window. Asking for more weeks, benefits coverage, or equity acceleration is normal — the release of claims you’d sign is worth real money to the employer.
Last reviewed: 2026-08-20 · Report an issue