Severance Pay Calculator

Quick Answer: How Much Severance Pay Should You Get?

Standard corporate severance packages provide 1 to 2 weeks of base salary per year of completed service, often with a minimum floor of 4 to 8 weeks. For an employee earning $90,000 with 5 years of tenure (at 2 weeks/year formula), a typical package equals 10 weeks of salary ($17,308 gross) plus payout for unused PTO and 2–3 months of subsidized COBRA health insurance.

Severance Package Composition

A comprehensive layoff severance package consists of three financial pillars:

1. Tenure Base Pay

Calculated as Years of Service × Weeks per Year. Provides direct wage replacement during your job search bridge.

2. Earned PTO Payout

Payment for all accrued, unused vacation and personal days. Legally mandated in CA, NY, IL, CO, MA, and many other states.

3. Health COBRA Subsidy

Employer covers 100% or partial monthly premiums for continued medical, dental, and vision insurance for 1 to 6 months.

Severance Pay Standards by Job Seniority

Job Level / Seniority	Weeks per Year of Service	Typical Minimum Floor	Average Package Ceiling
Entry to Mid-Level Individual Contributor	1.0 – 1.5 Weeks	2 – 4 Weeks	16 – 26 Weeks
Senior Professional / Lead Engineer	1.5 – 2.0 Weeks	4 – 8 Weeks	26 – 39 Weeks
Director / Department Manager	2.0 – 3.0 Weeks	8 – 12 Weeks	39 – 52 Weeks
Executive / VP / C-Suite	1 Month per Year	26 – 52 Weeks	52 – 104 Weeks (1–2 Years)

Worked Case Study: Layoff Package Breakdown

Let's evaluate David, a product manager earning $120,000 base salary who has worked at a tech firm for 6.5 years:

Base Severance Calculation:
Weekly salary = $120,000 / 52 = $2,307.69.
Company policy awards 2 weeks/year = 6.5 years × 2 weeks = 13 weeks of severance ($30,000 gross).
PTO Balance Payout:
David has 15 unused PTO days. Daily rate = $120,000 / 260 = $461.54.
15 days × $461.54 = $6,923 PTO cash payout.
COBRA Healthcare Continuation:
Employer covers 4 months of COBRA premiums at $700/mo = $2,800 healthcare value.
Total Gross Package & Net Cash:
Total Package Value = $30,000 + $6,923 + $2,800 = $39,723.
Gross Cash = $36,923. After estimated 34.65% supplemental tax withholding ($12,794), David takes home $24,129 in net cash lump sum.

Top Items to Negotiate in a Severance Agreement

Additional Severance Weeks: Request an extra 2–4 weeks of salary bridge, especially if your termination occurs near bonus distribution cycles.
Accelerated Equity Vesting: Ask for your upcoming RSU or stock option vesting tranche to accelerate or vest pro-rata.
Extended COBRA Healthcare Coverage: Request 3 to 6 months of 100% employer-subsidized health benefits.
Pro-Rated Annual Performance Bonus: If you worked most of the fiscal year prior to the layoff, request your pro-rated earned bonus.
Neutral Reference & Mutual Non-Disparagement: Ensure the agreement explicitly states your departure was due to a company restructuring and includes mutual non-disparagement protection.

Frequently Asked Questions

How is severance pay typically calculated in the United States?

While US federal law does not mandate severance pay, most corporate severance policies award between 1 to 2 weeks of regular base pay per full year of completed service (with senior executives often receiving 3 to 4 weeks per year or 1 month per year). Common packages also include minimum baseline floors (e.g. 4 to 8 weeks minimum regardless of tenure), payout of accrued unused PTO, and employer-subsidized COBRA health insurance continuation.

How is severance pay taxed when paid out as a lump sum?

The IRS classifies severance pay as supplemental wage income. When paid as a single lump sum, it is subject to mandatory federal supplemental withholding of 22% (or 37% for amounts exceeding $1 million), plus 6.2% Social Security (up to the annual wage ceiling), 1.45% Medicare, and applicable state and local income taxes. Overall, expect roughly 30% to 40% of your gross severance check to be withheld for taxes.

What is the federal WARN Act and does it guarantee severance?

The Worker Adjustment and Retraining Notification (WARN) Act requires employers with 100 or more full-time employees to provide at least 60 calendar days written advance notice before a plant closing or mass layoff (affecting 50+ workers). If an employer fails to provide 60 days advance notice, they are legally required to pay full wages and benefits for the unfulfilled notice period, which is distinct from discretionary severance packages.

What rights do employees over age 40 have regarding severance agreements?

Under the Older Workers Benefit Protection Act (OWBPA), an amendment to the ADEA, employees aged 40 and older must be given at least 21 days to review and consider a severance release agreement (or 45 days if part of a group layoff), and a mandatory 7-day post-signature revocation period during which they can cancel the signed agreement.

Can you negotiate a severance package offer?

Yes. Severance packages are legal contracts in exchange for signing a waiver of liability. You can negotiate key terms including: additional weeks of severance, extending employer-paid health insurance (COBRA), pro-rated annual bonus payout, accelerated vesting of RSUs and stock options, keeping your company laptop, and mutual non-disparagement agreements.

Does receiving severance affect unemployment insurance benefits?

It depends on your state. Some states (like California) allow you to collect unemployment immediately even while receiving lump-sum severance, whereas other states (like New York, Texas, and Illinois) may delay unemployment benefit start dates if severance exceeds statutory weekly wage thresholds or is paid out as salary continuation.

Is payout of accrued unused PTO required by law?

Roughly half of US states (including California, Illinois, Massachusetts, New York, and Colorado) legally require employers to pay out 100% of earned, unused vacation and PTO time upon termination as earned wages. In other states, PTO payout is governed by company employee handbook policy.

1. Salary & Tenure

2. PTO & Health Benefits