This is an estimate, not an entitlement. Severance in the United States comes from a policy or an offer, never from federal law. Only the separation agreement you sign is binding, and only your final pay statement tells you what was actually withheld.
Severance is a contract, not a right
Start here, because it changes what the number means. No federal law entitles a private-sector employee in the United States to severance pay. The Fair Labor Standards Act governs minimum wage and overtime and is silent on separation pay. Nothing in the tax code, ERISA or the Civil Rights Act creates an obligation to hand you anything beyond wages already earned.
What does create an obligation is a promise: an offer letter, an executive employment agreement, a written severance plan, a union contract, an established past practice, or the specific offer in front of you today. That is why this calculator asks for a formula instead of applying one. Anything that hardcodes "two weeks per year" is describing a common policy, not your policy — and the gap between the two is your money.
Two edges are worth knowing. New Jersey is currently the only state that mandates severance outright, requiring one week of pay per year of service in covered mass layoffs. And the federal WARN Act, constantly mistaken for a severance statute, is a notice statute: it requires 60 days' warning before a covered plant closing or mass layoff, and only converts into payment when the employer failed to give that warning. Several states run tougher versions — New York's is 90 days.
The weeks-per-year formula, and the two places it goes wrong
Nearly every severance policy reduces to the same skeleton: some number of weeks of base pay for each year of service, with a floor and usually a ceiling. One to two weeks a year is the ordinary band for non-executive staff; executives negotiate in months and multiples of base plus target bonus.
The first trap is partial years. Most handbooks pay per completed year, which means six years and eleven months pays six — at two weeks a year, that phrasing costs you two weeks of salary for eleven months of work. Some policies pro-rate, a few round to the nearest year. The tool defaults to truncating, because that is what the language usually says, and offers a switch because the difference is real money and worth checking against the exact wording.
The second trap is the ceiling. A cap of 26 weeks against a formula of two weeks a year stops adding anything after 13 years: the twenty-year veteran and the thirteen-year colleague receive identical severance. Long-tenured employees consistently overestimate their package because they multiply without checking whether the multiplication is allowed to finish. Caps also interact oddly with flat grants — a "base" of four weeks given to everyone in a layoff usually sits outside the cap, which is why this calculator keeps the two inputs separate.
What belongs in the package besides the weeks
The severance weeks are the headline, but the rest of the package is routinely a third of its value, and some of it is owed to you whether or not you sign anything.
- Unused PTO. Roughly half the states treat accrued vacation as earned wages that must be paid at separation regardless of policy — California, Colorado and Massachusetts among them. In the other states the handbook decides. This is separate from severance and should not be traded away as if it were part of the offer.
- A prorated bonus. If you worked nine months of the performance year, nine twelfths of target is a reasonable ask, and many plans already provide for it. Plans that require active employment on the payout date are common and are precisely the term worth negotiating on the way out.
- COBRA. Continuation coverage can run up to 18 months, but at the full unsubsidised premium it is one of the largest bills a newly unemployed household faces. Employers often cover three to six months. Treat that subsidy as value, not as cash: it is usually paid directly to the insurer, it is generally not taxable income to you, and it does not pay rent. The calculator keeps it in its own line for exactly that reason.
- Equity and outstanding loans. Unvested equity normally dies at termination unless the agreement accelerates it, and the exercise window on vested options is often 90 days. An outstanding 401(k) loan typically becomes due by your tax filing deadline or is treated as a taxable distribution. Neither shows up in a severance formula, and both can dwarf it.
Severance is taxed as supplemental wages
A lump sum paid separately from a regular paycheck is supplemental income. The employer normally withholds federal income tax at the flat 22% supplemental rate, jumping to 37% on any portion above one million dollars in a calendar year. FICA applies on top — 6.2% for Social Security up to the annual wage base and 1.45% for Medicare — because the Supreme Court held in United States v. Quality Stores (2014) that severance is wages for FICA purposes. State income tax withholding stacks on that.
The word doing the work is withholding. It is a prepayment, not a verdict. Someone laid off in March with a modest package may end the year in a lower bracket than 22% and receive part of it back at filing; someone laid off in November on top of a full year of salary may owe more. If the payment is instead structured as salary continuation on the normal payroll cycle, withholding usually follows your W-4 rather than the flat rate, which changes the size of each cheque without changing the tax you owe.
The release is what you are actually being paid for
Severance is rarely a gift. It is consideration for a general release of claims: by signing, you give up the right to sue over discrimination, wrongful termination, unpaid wages and essentially anything else that happened up to that date. That is a fair trade in most separations, and it is why the amount is negotiable — you are selling something.
If you are 40 or older, the Older Workers Benefit Protection Act sets a floor on the process. You get at least 21 days to consider the agreement, extended to 45 days when the termination is part of a group programme, which must also disclose the job titles and ages of everyone selected and not selected. After signing you have 7 days to revoke, and that revocation period cannot be waived. An employer pushing for a signature the same afternoon is either outside those rules or telling you something about how the rest of the negotiation will go.
Read the restrictive covenants as carefully as the number. Non-compete, non-solicit and non-disparagement clauses can outlast the money by years, and their enforceability is a question of state law — California, Minnesota, North Dakota and Oklahoma void most employee non-competes outright, while other states enforce reasonable ones. A package worth twelve weeks is a poor trade for a clause that keeps you out of your industry for twelve months.
Severance and unemployment benefits collide by state
This is the interaction that most often changes the total value of a package, and it is invisible in the severance number itself. States take three broad approaches: allocate the severance across the weeks it notionally covers and delay benefits accordingly; disqualify you only during weeks in which payments are actually made; or disregard severance entirely.
Under the second approach, a lump sum is strictly better than salary continuation, because continuation keeps you disqualified week after week while a lump sum clears in one. Under the first, the two are equivalent. The structure is usually negotiable and the state rule never is, so the order to do it in is: check the rule, then ask for the structure. Filing promptly matters too — benefits generally run from the claim date, not from the termination date.
Turn the package into runway, not into a total
A severance number in isolation tells you very little. What decides whether an offer is survivable is how many months of your actual expenses the net cash buys, which is why the calculator asks for a monthly burn figure and converts. Twenty thousand dollars gross is a very different thing at a burn of two thousand a month and at six.
Fold in the pieces that change the shape of the runway rather than its size: unemployment benefits extend it, COBRA premiums after the subsidy ends shorten it sharply, and the withholding you get back at filing arrives months later than you need it. If the runway comes out under three months, that is the argument to bring to the negotiation — more weeks, a longer COBRA subsidy, or a later termination date all buy the same thing.
What this estimate cannot know
It applies the formula you type in. It does not know whether your plan is governed by ERISA and therefore carries appeal rights, whether an established past practice has hardened into an implied promise, whether a state mini-WARN law applies to your layoff, or whether your particular facts support a claim worth more than the offer. It does not model your marginal tax rate, only the withholding rates you supply. Everything it produces is an estimate for planning and for checking an employer's arithmetic — the binding document is the separation agreement, and if the number matters, it is worth an hour of an employment lawyer's time before the 21 days run out.
Every calculation runs in your browser. Your salary, tenure, offer terms and monthly expenses are never uploaded, never logged and never stored, and there is no account. That matters here more than on most tools: the inputs together are a precise description of a person who has just been laid off.
Frequently asked questions
Is my employer legally required to pay severance?
In almost every case, no. No federal statute entitles a private-sector employee to severance pay — the Fair Labor Standards Act covers minimum wage and overtime and says nothing about separation pay. What creates the obligation is a contract: an offer letter, an executive agreement, a written severance plan, a collective bargaining agreement, or the offer sitting in front of you right now. The one real exception is New Jersey, which since 2023 requires one week of pay per year of service in covered mass layoffs. The federal WARN Act is often mistaken for a severance law; it is a notice law, requiring 60 days' warning before a covered mass layoff, and it only turns into money when the notice was not given.
How many weeks of severance is normal?
One to two weeks per completed year of service is the common band for non-executive roles, frequently with a floor of two to four weeks and a ceiling somewhere between 12 and 26 weeks. Executives negotiate in months rather than weeks and often get a multiple of base plus target bonus. Two details matter more than the headline number: whether partial years count (most handbooks say completed years only, so six years and eleven months pays six), and whether the cap swallows long tenure — at two weeks a year, a 26-week cap stops adding value after 13 years.
How much tax is withheld from severance pay?
Severance is supplemental wages. Paid as a lump sum separate from a regular paycheck, the employer normally withholds federal income tax at the flat 22% supplemental rate, rising to 37% on any amount above one million dollars in a year. FICA also applies — 6.2% Social Security up to the annual wage base plus 1.45% Medicare — because the Supreme Court settled in United States v. Quality Stores (2014) that severance is wages. State withholding stacks on top. All of this is withholding, not the tax you finally owe: if the layoff happened early in the year your total income may land in a lower bracket, and the difference comes back at filing.
Does severance stop me collecting unemployment?
It depends entirely on the state, and the rule is worth checking before you choose between a lump sum and salary continuation. Some states allocate severance to the weeks it notionally covers, which delays the start of benefits; some disqualify you only while payments are actually being made, which makes a lump sum better than continuation; others ignore severance completely. The same package can therefore be worth several thousand dollars more or less depending on how it is structured and where you live. Ask before signing, because the structure is usually negotiable and the state rule is not.
What am I giving up by signing the severance agreement?
Almost always your right to sue. The money is consideration for a general release of claims — discrimination, wrongful termination, unpaid wages, everything known at signing. If you are 40 or older, the Older Workers Benefit Protection Act gives you at least 21 days to consider the agreement (45 days in a group layoff, along with disclosure of the ages and job titles selected) and 7 days to revoke after signing, and those periods cannot be waived. Read the non-compete, non-solicit and non-disparagement clauses with the same attention as the number: they can outlast the money by years.