Severance Pay Calculator

How severance is typically calculated

The prevailing formula is one to two weeks of pay per year of service. Six years at $75k ($1,440/week) yields $8,600 to $17,300, plus accrued PTO payout and any prorated bonus. No US federal law mandates any of it; severance exists in company policy, employment contracts, and negotiations. This calculator prices the standard formulas so you know what "normal" looks like before you are reading an offer under deadline.

Severance pay example: 6 years at $75,000

Weekly pay is $75,000 / 52 = $1,442.31. At two weeks per year of service, 6 years gives 12 weeks, so the gross severance is 12 x $1,442.31 = $17,307.69. Paid as a lump sum, typical withholding is:

State income tax comes off on top in most states. At one week per year the same job pays $8,653.85 gross. Withholding is not the final tax bill: the severance is added to your income for the year and settled on your return.

What is actually negotiable

More than people assume, because the company is buying something: your signature on a release of claims. Weeks multiplier (1 to 2 weeks per year), benefits continuation (COBRA subsidy is worth $1,500 to $2,500/month for families), equity vesting acceleration, the "regretted departure" reference letter, and outplacement. Age 40+ workers get 21 to 45 days by law to consider, use them. Leverage peaks before you sign, never after.

How severance pay is taxed

Severance is supplemental wages: typically 22% flat federal withholding plus FICA and state, a lump sum can land in a higher withholding month than the same money spread out. Lump sum versus salary continuation also affects unemployment eligibility timing in many states; check yours before choosing when offered the option.

WARN Act: when notice becomes mandatory back pay

The weeks per year formula is discretionary. The WARN Act is not. Employers with 100+ full-time employees owe 60 days of written notice before a "plant closing" (50+ employees losing jobs at a single site) or a "mass layoff" (500+ employees, or 50 to 499 if that is at least 33% of the site's workforce). Skip the notice and the employer owes back pay and benefits for each day of notice they shorted, up to 60 days, calculated at your regular rate, not the negotiated multiplier. Several states run their own mini-WARN laws with lower headcount triggers and longer windows: California's kicks in at 75 employees at a covered establishment with 60 days notice; New York covers employers with just 50 employees, requires 90 days notice, and its mass layoff trigger drops as low as 25 employees if that is 33% of the site's workforce. If your layoff hit these thresholds and no notice went out, that back pay stacks on top of any negotiated severance, not in place of it.

The 7-day clock after you sign

The 21 to 45 day window is for deciding whether to sign. A separate, mandatory 7-day revocation period starts the moment you do, under OWBPA the release is not enforceable and the employer legally cannot cut the check until day 8. Read what is riding on that signature during the window: non-disparagement and confidentiality clauses (often with a clawback letting the employer demand the money back), a non-compete (unenforceable in California, Oklahoma, North Dakota, and Minnesota regardless of what the document says; enforceable with limits almost everywhere else), and language classifying the payment as "in consideration of the release" rather than earned wages, which affects how it is reported and whether it counts toward pension-plan compensation.

Severance vs. pay in lieu of notice

These get conflated but are not the same line item. Severance is typically discretionary, tied to tenure, and paid for a signed release. Pay in lieu of notice (PILON) substitutes for a notice period your contract or state law already requires, it is frequently owed regardless of whether you sign anything, and in several states it is treated as regular wages for withholding rather than supplemental pay, which can shift the effective rate on that portion. PILON also offsets WARN Act obligations dollar-for-dollar: an employer that owes 60 days of WARN notice and pays 8 weeks of PILON has satisfied it, while 8 weeks of discretionary severance layered on top does not. If your offer bundles both under one number, ask HR to break out which part is PILON, it runs on a different unemployment eligibility clock than discretionary severance.

Severance and unemployment: the timing trap

Getting a severance check does not always mean you can file for unemployment right away, and the reason surprises most people. Many states treat a lump sum severance as continuing your wages on paper, even though you were paid the whole amount at once. If your package equals 10 weeks of pay, the state may treat you as still employed for those 10 weeks and delay your unemployment eligibility until that period ends.

This varies a lot by state. Some states only delay eligibility if the severance is explicitly tied to a non-compete or continued availability for work, others apply the delay more broadly, and a few do not delay it at all. Before you decide between a lump sum and salary continuation, check your state unemployment office's specific rule. Getting this wrong can mean weeks of unemployment benefits you expected never arrive.

You can still back out after signing

Age 40 and older workers get 21 to 45 days to review a severance agreement before signing, covered above. What the calculator does not show is the right that kicks in after you sign: federal law under the Older Workers Benefit Protection Act gives you 7 days to revoke your signature and walk away from the agreement entirely, no explanation required.

The package is not final until that 7 day window closes. If new information surfaces, a competing offer appears, or you simply want a second read with a lawyer, you have a real window to reverse course. Employers typically will not release any severance funds until the revocation period has passed, so nothing is usually lost by using the full 7 days to think it over.

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