Free Severance Pay Calculator

How severance pay is calculated

Severance pay is usually based on how long you worked for the employer, as the U.S. Department of Labor notes. The most common severance pay formula is:

Severance pay = weekly pay × weeks of pay per year of service × years of service

Weekly pay is your annual salary divided by 52, or your hourly rate times your usual weekly hours. A worked example: on a $78,000 salary your weekly pay is $1,500. After 6 years at 2 weeks per year, that is 12 weeks of pay — $18,000. If the package also pays out 5 unused PTO days at your daily rate ($78,000 ÷ 260 workdays = $300), add $1,500 for a $19,500 package.

A written severance policy may change the result: a minimum (“at least 4 weeks”), a maximum (“no more than 26 weeks”), whether partial years count, and whether a bonus, unused PTO or health coverage is included. The calculator handles each of these, so you can mirror your employer’s policy line by line.

How much severance should I get?

There is no standard amount and no federal minimum. One or two weeks of pay per year of service is a common starting point; some employers give more for senior roles or in exchange for a broad release of claims. Your best guide is your own employer: check the employee handbook, any severance plan document, your offer letter or contract, and what colleagues received in earlier layoffs. Here is what the three common formulas pay on a $60,000 salary ($1,153.85 a week):

Is severance pay required by law?

No federal law requires severance pay. The Fair Labor Standards Act has no severance requirement; the Department of Labor describes severance as a matter of agreement between an employer and an employee. In practice it comes from an employment contract, a written severance plan, a union agreement or an offer made when you leave — so read those documents first. If you were due severance under an employer-sponsored plan and did not receive it, the DOL’s Employee Benefits Security Administration may be able to help.

A different law is often mixed up with severance: the WARN Act. Under the DOL’s WARN worker’s guide, employers with 100 or more full-time workers must give 60 calendar days’ written notice before a covered plant closing or mass layoff. WARN is about notice, not severance — but if a covered employer skips the notice, you may be able to claim back pay and benefits for up to 60 days. Some states have their own notice laws with extra requirements.

Is severance pay taxable?

Yes. According to IRS Publication 15, severance payments are wages subject to Social Security and Medicare taxes and federal income tax withholding. Severance, bonuses and lump-sum payouts of unused vacation are supplemental wages, which changes how tax is withheld — not how much you finally owe. For 2026:

• Federal income tax: when severance is paid separately from regular wages, the employer may withhold a flat 22%; supplemental wages above $1 million in a year are withheld at 37%. The employer can also add the payment to a regular paycheck and withhold on the combined amount.
• Social Security: 6.2% on wages up to the $184,500 wage base. If you have already earned that much this year, no more is withheld.
• Medicare: 1.45% on all wages, plus a 0.9% Additional Medicare Tax withheld on wages above $200,000 in the calendar year.
• State and local taxes depend on where you live and work; the calculator leaves them out.

Withholding is a prepayment. Your real tax depends on your income for the whole year: a package paid in a year you spend partly out of work may lead to a refund, while a large lump sum on top of a full year’s salary can be taxed at a higher bracket. If the timing is negotiable, ask a tax professional whether a split or later payment would help.

Can you get unemployment with a severance package?

It depends on your state. Unemployment insurance is a joint state-federal program, but each state runs its own and sets its own eligibility rules — including how it treats severance pay, PTO payouts and pay in place of notice. Apply as soon as you lose your job, report every payment exactly as the application asks, and let the state decide how it affects your benefits.

What to check in a severance agreement

A severance agreement is a contract. You usually receive the money in exchange for signing a release of claims — giving up your right to sue the employer over your job. Before you sign, check:

• The amount and the schedule — a lump sum or salary continuation, and when each payment arrives.
• What you release — and what you keep. The EEOC is clear that no agreement can take away your right to file a charge with the EEOC or take part in its investigations.
• If you are 40 or older, a valid waiver of age discrimination claims (under the Older Workers Benefit Protection Act) must be written so you can understand it, refer to the ADEA, advise you in writing to consult a lawyer, give you at least 21 days to consider it — 45 days in a group layoff — and let you revoke your signature within 7 days after signing.
• Health insurance — COBRA lets you keep the employer’s group plan, generally for up to 18 months after a job loss, but you can be charged up to 102% of its cost and you have at least 60 days to elect it (DOL COBRA guide). Ask whether the employer will pay some or all of the premiums.
• Unused PTO, bonus and commissions — whether they are paid on top of severance or folded into it. Federal law does not require paid vacation, so payout rules come from your state and your employer’s policy.
• Equity and retirement — vesting dates and deadlines to exercise stock options.
• Restrictive clauses — non-compete, non-solicitation, confidentiality and non-disparagement terms, and whether they bind both sides.
• References — how your departure will be described and who answers reference calls.

If the amount is large or the release is broad, an hour with an employment lawyer is usually money well spent.

How to negotiate a severance package

Yes, you can negotiate severance. It is an agreement, and the first offer is not always the last — especially when you have long service, a pending bonus or a strong reason the release matters to the employer.

1. Don’t sign on the spot. Ask for the agreement in writing and the time to review it.
2. Know your number. Compare the offer with your employer’s own policy and with 1–3 weeks per year in the calculator above.
3. Ask for specific items, with a reason: more weeks for long service, employer-paid COBRA, your prorated bonus, more time to exercise options, outplacement support or an agreed reference.
4. Put it in writing. The rules of a salary negotiation apply — one clear number, the reason behind it, a friendly tone. Our salary negotiation email generator shows the structure.

Next steps after a layoff

Severance buys you time; the first weeks decide how far it goes. File for unemployment, choose your health coverage before the COBRA deadline, and refresh your resume with a clean ATS-friendly resume template. Then set a weekly target and log every application and follow-up in a job application tracker — our guide on how to find a job faster has a step-by-step plan. If you would rather spend your time on interviews than on forms, automated job search finds matching roles on company career pages and applies for you.

This calculator gives an estimate, not legal or tax advice. Your severance agreement, your employer’s policy and your state’s laws decide what you are owed; for a large package or a broad release, talk to an employment lawyer or a tax professional.