Severance Pay Calculator

How severance pay is calculated

Nearly every US severance policy is built on the same formula: a fixed number of weeks of pay for each year you worked there.

Severance = (annual salary ÷ 52) × weeks per year of service × years of service

One week per year of service is the most common baseline for individual contributors; two weeks per year is typical for managers, and three to four weeks per year appears in executive agreements. Most policies also set a ceiling — 26 weeks (six months) is the usual cap — which is why the calculator has a maximum-weeks field.

A real package is usually more than the base formula. Unused PTO is often paid out at your hourly rate, and employers may add a COBRA stipend, a prorated bonus or an extra lump sum to close the exit quickly.

Example severance packages

Figures are gross, before withholding. Severance is treated as supplemental wages, so expect roughly 22% federal withholding plus 7.65% FICA on the payout — the same treatment the retro pay calculator uses. If severance ends your year early, the tax refund estimator can show whether you over-withheld.

Severance pay FAQ

How is severance pay calculated?

The most common formula is a set number of weeks of pay for each year of service — typically one to two weeks per year. Multiply your weekly pay (annual salary ÷ 52) by the weeks per year, then by your years of service. Many employers cap the total, often at 26 weeks.

Is severance pay required by law?

In most US jobs it isn't. Federal law doesn't require severance; it comes from your employment contract, a company policy, a union agreement or a negotiated separation. The WARN Act can require 60 days' notice or pay in lieu for large layoffs, which is separate from severance.

How is severance pay taxed?

Severance is taxable wages. Because it's supplemental income, employers commonly withhold federal tax at a flat 22% for amounts under $1 million, plus Social Security and Medicare (7.65%). State income tax may also apply. Your final tax is settled when you file.

Does severance affect unemployment benefits?

It depends on your state. Some states delay unemployment benefits while severance is being paid out over time; others don't reduce benefits at all when severance is a lump sum. Check your state's unemployment office rules before filing.

Can I negotiate my severance package?

Often yes. Common levers are extra weeks of pay, payout of unused PTO, an employer-paid COBRA period, keeping a prorated bonus, and the timing of the payment. Use the calculator to price each option before you respond to an offer.