Severance Pay Calculator

Q: How is severance pay calculated?

The most common severance formula is 1-2 weeks of pay for each year of service. For example, an employee earning $60,000/year with 5 years of service might receive 5-10 weeks of pay ($5,769-$11,538).

Q: Is severance pay required by law?

In the United States, severance pay is generally not required by federal law. It is typically offered at the employer's discretion, though some employment contracts or company policies may guarantee it.

How Severance Pay is Calculated

The most common severance formula is:

Severance = (Weekly Salary) × (Years of Service) × (Weeks per Year)

Typical severance ranges from 1 to 4 weeks of pay per year of employment.

Severance Pay by Years of Service

Years	1 wk/yr	2 wks/yr	3 wks/yr
1 year	$1,154	$2,308	$3,462
3 years	$3,462	$6,923	$10,385
5 years	$5,769	$11,538	$17,308
10 years	$11,538	$23,077	$34,615
15 years	$17,308	$34,615	$51,923
20 years	$23,077	$46,154	$69,231

Based on $60,000 annual salary ($1,153.85/week).

Is Severance Pay Required?

In the US, severance is generally not required by law. However, you may be entitled to severance if:

Your employment contract includes severance provisions
Your company has a documented severance policy
The WARN Act applies (60 days notice required for mass layoffs of 100+ employees)
You negotiate it as part of a separation agreement

Is Severance Pay Taxed?

Yes, severance pay is subject to federal and state income taxes, as well as FICA (Social Security and Medicare). It is treated as supplemental income and may be taxed at a flat 22% federal rate for withholding purposes.

FAQ

How is severance pay calculated?

The most common formula is 1-2 weeks of pay per year of service. For example, 5 years at a $60,000 salary with 2 weeks/year = 10 weeks = $11,538.

Is severance pay required by law?

Generally no. Severance is at the employer's discretion unless your contract or company policy guarantees it.