Severance Pay Calculator

Severance in the United States is almost never a legal entitlement. Outside of a written contract, a collective agreement, or a mass layoff triggering WARN Act notice requirements, an employer generally owes nothing beyond wages already earned. What you are offered comes from company policy, from a desire to protect reputation, and above all from wanting a signed release of claims. That last point is the important one, because it means the first offer is a negotiating position rather than a fixed calculation.

The most common formulas are one or two weeks per year of service, often with a floor for short-tenured employees and a cap for long-serving ones. Senior roles frequently do better, and packages sometimes include a prorated bonus, accelerated equity vesting, extended health coverage, or outplacement services. These non-cash items are often easier for an employer to concede than additional weeks of pay, which makes them worth asking for specifically.

The number that matters is not the gross. Severance is taxed as supplemental wages, which in practice means aggressive withholding — commonly a flat twenty-two percent federal rate on top of Social Security, Medicare and state tax. A package presented as six months of salary lands as considerably less, and planning around the gross figure is how people run short.

Health insurance is the expense that most often surprises people. Employer-sponsored coverage typically has the employer paying seventy percent or more of the premium, and that contribution stops. COBRA lets you keep the same plan but at the full cost plus a two percent administrative fee, which frequently means a premium three or four times what was coming out of your paycheck. Marketplace plans are worth pricing against it, since a drop in income may qualify you for substantial subsidies.