Severance Pay Calculator
Estimate severance pay from years of service and base salary.
Covers one week per year, two weeks per year, and custom multipliers with a gross payout summary.
Severance pay is compensation given to employees when they are laid off or terminated. There is no universal legal requirement for severance in the United States — it varies by company policy, employment contract, and sometimes state law.
The Formula:
Severance = (Annual Salary / 52) × Weeks per Year × Years of Service
Where:
- Annual Salary = your gross yearly salary before taxes
- Weeks per Year = the number of weeks of pay offered for each year you worked (typically 1-4 weeks)
- Years of Service = how long you worked at the company
Common severance formulas by generosity:
| Type | Rate | Typical Employer |
|---|---|---|
| Minimum | 1 week per year | Small companies |
| Standard | 2 weeks per year | Most mid-size and large companies |
| Generous | 3-4 weeks per year | Tech companies, financial firms |
| Executive | Individually negotiated | Senior leadership |
Practical Example: An employee with an $80,000 salary and 5 years of service at the standard rate of 2 weeks per year: Weekly pay = $80,000 / 52 = $1,538.46 Total weeks = 5 x 2 = 10 weeks Severance = 10 x $1,538.46 = $15,384.62 That is roughly 2.5 months of pay.
What else may be included in a severance package:
- Continuation of health insurance (COBRA coverage paid by employer)
- Payout of unused vacation or PTO days
- Outplacement services (help finding a new job)
- Extended vesting of stock options
Important tax and legal notes:
- Severance pay is taxable as ordinary income in the US
- Some employers offer the option to receive severance in a lump sum or spread over time — the tax impact may differ
- You may be asked to sign a release of claims in exchange for the severance
- Always review severance agreements carefully and consider consulting an employment attorney before signing
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