How to use the severance pay calculator
- Enter your pay and whether it is per year or per week.
- Enter your years of service, using decimals for part years.
- Enter the weeks of pay per year of service from your offer or your company policy. The default is only an example.
- Add a minimum, a maximum, an unused vacation payout and a withholding estimate if they apply, then read the weeks, the total and the amount after withholding.
Formula
Weekly pay = yearly pay / 52 (or the weekly pay you enter)
Weeks = years of service x weeks per year, raised to the minimum and capped at the maximum
Severance = weekly pay x weeks
After withholding = (severance + vacation payout) x (1 - withholding rate)
The weeks-per-year figure is not set by a general rule. It comes from your employer's offer, policy or contract.
Worked example
With a salary of $78,000, the weekly pay is $1,500. After 6.5 years of service at 2 weeks per year, the severance is 13 weeks, or $19,500.
A minimum of 20 weeks would raise it to $30,000, and a cap of 10 weeks would reduce it to $15,000. With withholding estimated at 22 percent, the amount after withholding on $19,500 is $15,210.00. Adding a $600 vacation payout would raise the total before tax.
How severance is usually set
A common structure is a number of weeks of pay for each year of service, sometimes with a minimum and a maximum. Many employers also offer extras such as continued health coverage or outplacement help. In most U.S. jobs, no federal law requires severance, so what you get comes from your contract, a company plan or a negotiated agreement. It may require you to sign a release of claims.
Taxes and timing
Severance is generally taxable income. It may be paid as a lump sum or as continued paychecks, and the withholding depends on how it is paid. The withholding percent in this tool is an example value, so check your pay stub and talk to a tax professional. Use the gross pay calculator to see how a paycheck is built, and the PTO accrual calculator for leave balances.
Planning after a job loss
Severance buys time. Work out your monthly needs with the emergency fund calculator, and compare any new offer with the hourly to salary calculator. Ask whether health insurance continues and whether accrued vacation is paid out.
Assumptions and limits
- The weeks per year, minimum, maximum and withholding rate are values you enter. The defaults are examples, not a rule or a norm.
- A year has 52 weeks for converting a yearly pay to a weekly pay.
- Bonuses, commissions, benefits and unemployment benefits are not included.
- This is not legal or tax advice. Read your offer, and consider asking a professional before signing.
Frequently asked questions
How is severance pay calculated?
A common method is a number of weeks of pay for each year of service. Multiply your weekly pay by the total number of weeks.
Am I legally owed severance?
In most U.S. situations there is no general legal requirement. It depends on your contract, your employer's policy and sometimes the laws that apply to a layoff.
Is severance pay taxable?
Generally yes, as income. The amount withheld may differ from the tax you owe, so you may owe more or get a refund.
Can I negotiate severance?
Often yes, especially when you are asked to sign a release. Consider asking a lawyer to review the agreement.