Severance Pay Calculator
Estimate severance package value based on years of service, salary, tax withholding, and benefits continuation using standard industry formulas.
Standard: 1-2 weeks per year
Tax Withholding
IRS supplemental rate: 22%
Benefits Continuation (Optional)
Enter employment details and click calculate.
What This Calculator Does
This severance pay calculator estimates the total value of a severance package including weeks of pay based on years of service, tax withholding at IRS supplemental rates, and optional COBRA or health benefits continuation. It helps both employers structuring packages and employees evaluating offers.
The Formula
The standard severance formula is 1 to 2 weeks of pay per year of service. The IRS treats severance as supplemental wages, subject to 22% federal withholding (or 37% on amounts exceeding $1 million). FICA (7.65%) also applies. The total package value includes severance pay plus the value of any continued benefits.
Step-by-Step Example
Enter employment details
Annual salary: $85,000 ($1,635/week). Years of service: 5. Formula: 2 weeks per year.
Calculate gross severance
5 years x 2 weeks x $1,635 = $16,346 gross severance.
Apply tax withholding
Federal (22%): $3,596. State (5%): $817. FICA (7.65%): $1,250. Net: $10,683.
Add benefits value
3 months COBRA at $650/mo = $1,950. Total package value: $18,296.
Real-World Use Cases
Negotiation Preparation
Employees receiving a severance offer can model different scenarios (more weeks, longer benefits) to negotiate effectively.
Employer Budgeting
HR teams planning layoffs can estimate total severance costs across affected employees.
Financial Planning
Calculate how long your net severance will cover expenses while searching for new employment.
Common Mistakes to Avoid
Assuming severance is tax-free. Severance is taxable income subject to federal, state, and FICA withholding.
Not negotiating. Initial severance offers are often the starting point, not the final offer. Benefits continuation, outplacement services, and extended vesting are all negotiable.
Forgetting that signing a severance agreement usually requires waiving the right to sue the employer. Have an attorney review before signing.
Not accounting for unemployment benefits. In most states, severance payments may delay eligibility for unemployment insurance.
Frequently Asked Questions
Accuracy and Disclaimer
This calculator provides estimates for planning purposes. Severance agreements involve legal rights and obligations. Consult an employment attorney before signing any severance agreement.
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