Severance Package Calculator

About the Severance Package Calculator

Losing a job is stressful, and the severance package offered on the way out is often the most important money decision of that moment. Severance is pay an employer gives when it ends your employment, usually in return for signing a release of legal claims. In most of the United States it is not required by law, so the amount depends on company policy, your contract and what you negotiate. Knowing what a typical package looks like, and what it is worth after tax, helps you judge an offer and plan the months ahead.

This severance package calculator estimates the package from your salary, years of service and the number of weeks of pay per year. It adds unused paid time off and any other cash payments, applies a withholding rate, and shows how many months of expenses the money will cover.

How to Use the Severance Package Calculator

Enter your annual salary and years of service.

Choose the weeks of pay per year of service in the offer or company policy.

Enter unused paid time off, any other payments, your withholding rate and monthly expenses.

The Formulas

  weekly pay   = salary ÷ 52
  severance    = weekly pay × weeks per year × years of service
  daily pay    = salary ÷ 260 working days
  PTO payout   = daily pay × unused days
  total        = severance + PTO payout + other payments
  after tax    = total × (1 − withholding rate)
  runway       = after tax ÷ monthly expenses

Step-by-Step Example

80,000 salary, 6 years of service, 2 weeks per year, 8 unused PTO days, 27% withholding, 4,000 monthly expenses.

  weekly       80,000 ÷ 52 = 1,538.46
  severance    1,538.46 × 2 × 6 = 18,461.54
  PTO          80,000 ÷ 260 × 8 = 2,461.54
  total        20,923.08 before tax
  after tax    20,923.08 × 0.73 = 15,273.85
  runway       15,273.85 ÷ 4,000 = 3.8 months

What Is a Typical Package?

One or two weeks of pay per year of service is a common formula, with a minimum such as two to four weeks and sometimes a maximum. Senior employees and executives often receive more, sometimes several months of pay, plus bonuses or accelerated vesting of stock. Mass layoffs may come with a standard formula for everyone. Contracts and collective agreements can set specific terms that override general policy.

Taxes on Severance

In the US, severance is treated as supplemental wages. Employers often withhold federal income tax at a flat 22% on supplemental pay up to 1 million, plus state tax, Social Security and Medicare. The actual tax depends on your total income for the year, so you may owe more or get a refund when you file. A lump sum received late in the year can push income into a higher bracket; sometimes payments can be spread across two tax years.

Health Insurance

Losing employer health cover is often the biggest hidden cost. In the US, COBRA lets you keep the same plan, usually for up to 18 months, but you pay the full premium plus a fee. Some severance agreements include employer-paid COBRA for a few months, which can be worth thousands. Marketplace plans may be cheaper, especially if your income for the year drops.

Negotiating

Severance offers are often negotiable, particularly for longer-serving employees, strong performers, or where the employee may have a legal claim. Common requests include more weeks of pay, paid health cover, payment of a pro-rated bonus, extra time to exercise stock options, outplacement services, a neutral or positive reference, and agreed wording for how the departure is described. Be polite and specific, and get any agreement in writing.

The Release

Most packages require signing a release that gives up the right to sue the employer, and may include confidentiality, non-disparagement or non-compete terms. In the US, employees aged 40 or over must be given at least 21 days to consider the agreement, 45 days in group layoffs, and 7 days to revoke after signing. Have an employment lawyer review the release if the amount is large or you think you were treated unfairly.

Unemployment Benefits

You may still qualify for unemployment benefits after receiving severance, though some states delay or reduce benefits while severance is being paid. Apply promptly, as rules vary by state.

Retirement Accounts and Stock

Check what happens to retirement savings, stock options and restricted stock. Vested 401(k) money is yours, and can usually be left in the plan or rolled over to an IRA. Unvested stock and options may be forfeited unless the agreement accelerates vesting, and vested options often must be exercised within a short window after leaving.

Planning the Gap

Use the runway figure to plan your job search. If severance covers three or four months, start applying straight away, cut non-essential spending and avoid big commitments until a new role is confirmed. Building an emergency fund of several months' expenses while employed makes the next transition much easier.

Getting It in Writing

Make sure every agreed term appears in the final signed agreement.

Understanding Your Result

The headline gives the total package before tax.

The severance pay line shows the calculation from weekly pay.

The PTO and other line shows paid time off and other payments.

The after tax line gives the estimated net amount and the months of expenses it covers.

When Should You Use This Calculator?

Use it when you receive a severance offer.

Use it to prepare for a layoff or negotiate a package.

Use it to plan your budget and job search timeline.

Common Mistakes

Signing quickly. Take the time allowed to review and negotiate.

Forgetting health insurance. COBRA can be expensive.

Assuming withholding equals the final tax. You may owe more.

Ignoring unemployment benefits. You may still be eligible.