Severance pay calculator

How severance pay is typically calculated

There is no legal formula for severance. Most US employers that offer it use a simple rule: a set number of weeks of pay for each year you worked. One to two weeks per year of service is the range you see most often. That is a market custom, not a right, so treat any number as a starting point for negotiation rather than a fixed entitlement.

The estimate has three parts:

• Base severance — your weekly pay multiplied by the weeks-per-year rate and your years of service. Weekly pay is your annual salary divided by 52, or your hourly wage times hours per week.
• Unused PTO — accrued vacation or paid time off, paid at your daily rate (annual salary divided by 260 working days).
• Lump-sum extras — a prorated bonus, a negotiated add-on, or other one-time amounts your employer includes.

Worked example, matching the defaults: a worker earning $75,000 a year with six years of service, at one week of pay per year, has a weekly pay of about $1,442. Six weeks of severance is roughly $8,654. Add eight unused PTO days at a daily rate near $288 (about $2,308), and the gross severance is about $10,962. Applying the 22% federal supplemental withholding leaves about $8,550 before state tax and FICA. Change the rate to two weeks per year and the base severance doubles to about $17,308.

What affects your severance

The single biggest lever is the weeks-per-year rate, and it is often negotiable. Seniority, the reason for the separation, whether the layoff is part of a larger reduction, and your employer's written policy all move the number. Executives and long-tenured employees frequently receive more than the standard one-to-two-week range. Companies also sometimes tie a larger payment to what they are asking for in return, such as a broad release of claims or a non-compete.

Timing matters too. The WARN Act requires employers with 100 or more employees to give at least 60 calendar days of advance written notice of a plant closing or mass layoff affecting 50 or more employees at a single site. WARN covers notice, not severance, but a missed notice can mean back pay on top of any package.

What to check before you sign

A severance offer is a contract, and the money is often the least important part. Before you sign, read for these:

• Release of claims. Almost every severance agreement asks you to waive your right to sue the employer. Understand exactly what you are giving up, and whether the payment is fair compensation for it.
• Non-compete and non-solicitation. The agreement may restrict where you can work next. Enforceability depends on your state and the terms; see our guide to the non-compete clause.
• Deadlines. Offers usually expire, and workers over 40 often get a review window under the Older Workers Benefit Protection Act. Do not let a countdown push you into signing before you understand the terms.

If the numbers are significant or the clauses are broad, have the agreement reviewed before you sign. An employment lawyer is the thorough option, and your state labor department can answer questions about your rights at no cost. For a fast first read of the clauses, Pact reads a severance agreement on your iPhone and flags the release, the non-compete, and the deadlines in plain language. It does not replace a lawyer for a complex package, but it tells you what is in the document before you commit.