This is an estimate. It doesn't entitle you to anything. 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 shows what was actually withheld.
Severance pay comes from a contract, not a legal 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 says nothing about separation pay. Nothing in the tax code, ERISA or the Civil Rights Act obliges an employer 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's why this calculator asks for a formula instead of applying one. Anything that hardcodes "two weeks per year" describes a common policy, which may not be your policy, and the gap between the two is your money. The same goes for an employer pricing a layoff: run your own written terms through it and ignore the industry habit.
Two edge cases 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 turns into payment when the employer failed to give that warning. Several states run tougher versions. New York's is 90 days.
The severance weeks-per-year formula, and the two places it goes wrong
Nearly every severance policy comes down 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 range for non-executive staff. Executives negotiate in months, and in multiples of base plus target bonus.
The first trap is partial years. Most handbooks pay per completed year, so six years and eleven months pays six. At two weeks a year, that wording costs you two weeks of salary for eleven months of work. Some policies prorate, and a few round to the nearest year. The tool truncates by default, because that's what the language usually says. It also has a switch, since the difference is real money and worth checking against the exact wording.
The second trap is the ceiling. A 26-week cap on a formula of two weeks a year stops adding anything after 13 years, so the twenty-year veteran and the thirteen-year colleague get identical severance. Long-tenured employees routinely 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 a severance package besides the weeks
The weeks get the attention, 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 whatever the policy says, among them California, Colorado and Massachusetts. In the other states the handbook decides. This money is separate from severance. Don't let it get 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 that's exactly the term to negotiate on the way out.
- COBRA. Continuation coverage can run up to 18 months, but at the full unsubsidized premium it's one of the largest bills a newly unemployed household faces. Employers often cover three to six months. Count that subsidy as value and keep it apart from cash: it's usually paid straight to the insurer, it's generally not taxable income to you, and it doesn't pay rent. The calculator keeps it on its own line for 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 comes due by your tax filing deadline or is treated as a taxable distribution. Neither shows up in a severance formula, and either can dwarf it.
Severance pay is taxed as supplemental wages
A lump sum paid apart 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 that matters is withholding. It's a prepayment, and the final tax bill can come out different. Someone laid off in March with a modest package may end the year in a bracket below 22% and get 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 set up as salary continuation on the normal payroll cycle, withholding usually follows your W-4 instead of the flat rate. That changes the size of each check without changing the tax you owe.
The release is what your severance actually pays for
Severance is rarely a gift. It's payment 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. In most separations that's a fair trade, and it's why the amount is negotiable. You're selling something.
If you're 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 program, 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 can't 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 whether they hold up is a question of state law. California, Minnesota, North Dakota and Oklahoma void most employee non-competes outright, while other states enforce reasonable ones. Twelve weeks of pay is a bad trade for a clause that keeps you out of your industry for twelve months.
Severance and unemployment benefits collide by state
This interaction changes the total value of a package more often than anything else, and you can't see it in the severance number. States take three broad approaches. Some allocate the severance across the weeks it notionally covers and delay benefits to match. Some disqualify you only during weeks when payments are actually made. The rest ignore severance entirely.
Under the second approach, a lump sum beats salary continuation outright, because continuation keeps you disqualified week after week while a lump sum clears in one. Under the first, the two come out the same. The structure is usually negotiable and the state rule never is, so check the rule first, then ask for the structure. File promptly, too. Benefits generally run from the claim date, not the termination date.
Turn the severance package into runway, not a total
A severance number on its own tells you very little. Whether you can live on the offer depends on how many months of your actual expenses the net cash covers. That's 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 than at six.
Then fold in the pieces that change the shape of the runway more than its size. Unemployment benefits extend it. COBRA premiums after the subsidy ends shorten it sharply. The withholding you get back at filing arrives months after you need it. If the runway comes out under three months, bring that number to the negotiation. More weeks, a longer COBRA subsidy or a later termination date all buy you the same thing: time.
What this severance estimate cannot know
It applies the formula you type in. It doesn't know whether your plan is governed by ERISA and so 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 doesn't model your marginal tax rate, only the withholding rates you enter. Everything it produces is an estimate for planning and for checking an employer's arithmetic. The binding document is the separation agreement. If the number matters, spend an hour with an employment lawyer before the 21 days run out.
Every calculation runs in your browser. Your salary, tenure, offer terms and monthly expenses are never uploaded, logged or stored, and there's no account. That matters more here than on most tools, because together those inputs precisely describe a person who has just been laid off.
Frequently asked questions
Is my employer legally required to pay severance?
Almost never. 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. The obligation comes from 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. People often mistake the federal WARN Act for a severance law. It's a notice law that requires 60 days' warning before a covered mass layoff, and it only turns into money when the notice wasn't given.
How many weeks of severance is normal?
One to two weeks per completed year of service is the common range for non-executive roles, often with a floor of two to four weeks and a ceiling somewhere between 12 and 26 weeks. Executives negotiate in months instead of weeks and often get a multiple of base plus target bonus. Two details matter more than the headline number. First, whether partial years count: most handbooks say completed years only, so six years and eleven months pays six. Second, 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 apart 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 applies too, 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, which isn't the tax you finally owe. If the layoff came early in the year, your total income may land in a lower bracket, and the difference comes back when you file.
Does severance stop me collecting unemployment?
That depends entirely on the state, so check the rule 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 be worth several thousand dollars more or less depending on how it's structured and where you live. Ask before you sign, because the structure is usually negotiable and the state rule isn't.
What am I giving up by signing the severance agreement?
Almost always your right to sue. The money pays for a general release of claims: discrimination, wrongful termination, unpaid wages, everything known at signing. If you're 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 can't be waived. Read the non-compete, non-solicit and non-disparagement clauses as closely as the number. They can outlast the money by years.