United States · Leaving a job

Severance pay calculator

Start with the fact every other page dances around: no federal law requires an employer to pay severance. The U.S. Department of Labor says it plainly — severance pay "is a matter of agreement between an employer and an employee". When severance is paid, employers most often build it as a set number of weeks of pay for each year of service. This severance calculator — the same tool whether you searched for a severance package calculator or a plain severance calculator — applies that convention to your own figures, so you can judge an offer, or the lack of one, with a number in hand.

First: severance is not owed by law

The Fair Labor Standards Act (FLSA) — the federal wage law — requires minimum wage and overtime pay, but on severance it is silent by design. The Department of Labor's own guidance reads: "There is no requirement in the Fair Labor Standards Act (FLSA) for severance pay. Severance pay is a matter of agreement between an employer and an employee (or the employee's representative)." The same guidance notes that severance is usually based on length of employment — which is exactly the convention this calculator applies.

So where does a right to severance come from, when it exists? From a promise: a clause in your employment contract, a written company policy or handbook provision, a collective bargaining agreement if you are unionised, an employer-sponsored severance plan, or the separation agreement negotiated when you leave. Where an employer-sponsored plan promised the benefit and did not pay it, the DOL's Employee Benefits Security Administration (EBSA) may be able to help. States do not fill the federal gap either: severance stays a matter of the employer's policy or agreement — the Texas Workforce Commission, for example, lists severance pay among the benefits an employer must pay only when its written policy or an agreement provides for it. If none of those documents promises you anything, an employer can lawfully pay nothing, however long you worked there. That is the honest baseline from which any negotiation starts.

How the estimate is built

Because there is no statutory formula, the tool uses the structure employers themselves write into policies: weeks of pay per year of service × your weekly pay. Weekly pay is your annual salary divided by 52, or the weekly figure you enter directly. Two weeks per year of service is the most familiar policy rate and is the default above; one week per year is also common, and long-serving or senior employees are sometimes offered three or four. If you have an offer letter, run the calculator with the exact weeks-per-year figure it states — that comparison is the fastest way to see whether an offer matches the employer's own policy. If there is no policy and no offer, the result is still useful: it is the number a negotiation would typically be anchored on, not a legal entitlement.

What a severance package can include

A "severance package" is the whole bundle, not just the cash. Besides the weeks-of-pay amount, agreements commonly cover the payout of unused vacation or PTO (owed automatically in some states — check the state-by-state payout rules, or value your hours with the PTO payout calculator), how long employer health coverage continues or whether the employer subsidises COBRA for a period, and practical items such as outplacement help or a reference letter. Two cautions belong here. First, in exchange for the package the employer will usually ask you to sign a release of claims — giving up the right to sue over the separation — so the signature is the real transaction, and having an employment lawyer read the agreement before you sign is money well spent. Second, severance is taxable wages: what you will actually keep is smaller than the headline figure, as our guide is severance pay taxable? explains.

The WARN Act: notice, not severance

The one federal rule people confuse with severance is the Worker Adjustment and Retraining Notification (WARN) Act. WARN does not order severance pay at all — it orders warning. Employers with 100 or more employees must generally give at least 60 calendar days' advance written notice before a plant closing or a mass layoff affecting 50 or more employees at a single site of employment. There are exceptions — unforeseeable business circumstances, faltering companies and natural disasters among them — and some states run their own "mini-WARN" laws with wider reach. The Department of Labor administers WARN guidance but does not itself sue for damages; the right to enforce it belongs to the affected workers in court. Notice pay and severance pay solve different problems, and a WARN notice never replaces a severance agreement.

A worked example

Take an employee earning $78,000 a year who is leaving after 6 years, under a policy of 2 weeks of pay per year of service. Weekly pay is $78,000 ÷ 52 = $1,500. The policy gives 6 × 2 = 12 weeks, so the estimate is 12 × $1,500 = $18,000, before taxes. Change any one input and the point of the tool becomes clear: at 1 week per year the same employee's policy figure is $9,000, and a colleague with 10 years at 2 weeks per year reaches $30,000 — years of service and the policy rate do all the work, which is why both numbers are worth confirming in writing before you rely on them.

Common questions

Can my employer legally give me no severance at all?

Yes, unless a contract, policy, collective bargaining agreement or severance plan promises one. Federal law does not require severance, and length of service alone does not create the right.

Is severance calculated on my salary or on my total pay?

On whatever the governing document says. Most policies speak of weeks of base pay, which is what this calculator assumes. If your policy says "compensation" or includes regular bonuses, the figure could be higher — the policy text wins.

What if I was fired for cause?

Many policies pay severance only on layoffs, redundancies or mutual separations, and exclude terminations for misconduct. That, too, is a policy question, not a legal one — read the eligibility wording before assuming either way.

Does severance affect unemployment benefits?

It can, and the rules are set by each state's unemployment agency — some states delay benefits while severance covers a period. Check your state's agency guidance before timing a claim; this calculator does not model it.

Image credits

The office packing photograph is by Bench Accounting, via Wikimedia Commons, license CC0. The office handshake photograph is by perzon seo, via Wikimedia Commons, license CC BY 2.0. The empty desk photograph is by Luca Bravo, via Wikimedia Commons, license CC0. All three were already in this site's licensed collection; all were converted to WebP and resized. No image on this page was generated by AI.

Sources

• U.S. Department of Labor — Severance Pay (dol.gov/general/topic/wages/severancepay)
• U.S. Department of Labor — Plant Closings and Layoffs / WARN (dol.gov/general/topic/termination/plantclosings)
• U.S. Department of Labor, Employment and Training Administration — WARN Act (dol.gov/agencies/eta/layoffs/warn)
• Texas Workforce Commission — Texas Payday Law (twc.texas.gov)

The calculator implements the weeks-of-pay-per-year-of-service convention described on this page. Expected outputs were derived independently of the code and the engine is tested against them; the scenarios are documented in the batch report behind this page.