Severance Pay Calculator

The Severance Pay Calculator estimates your severance package from your years of service and your weekly pay. Pick a weeks-per-year or months-per-year formula (with an optional cap), enter your service length directly or let the tool calculate it from your hire and termination dates, add any unused PTO, and see both the gross and the estimated after-tax (net) amount. The built-in financial runway gauge then shows how many months your net severance can cover your living expenses.

What is Severance Pay?

Severance pay is compensation an employer provides to an employee whose job is ending — usually through a layoff, restructuring, or mutual separation rather than termination for cause. It is meant to cushion the gap between jobs. The amount is typically tied to how long you worked (your years of service) and your rate of pay, and it is often paid either as a lump sum or as salary continuation.

Severance Pay Formula

The most common way to calculate severance is weeks of pay for each year of service:

If your employer expresses severance in months of pay per year instead of weeks, each month is converted to about 4.33 weeks (52 weeks ÷ 12 months). Many policies also apply a cap — for example, "2 weeks per year of service, up to a maximum of 26 weeks."

Worked Example

Suppose you earn an annual salary of 62,400 (weekly pay of 1,200), you worked for 7 years, and your employer offers 2 weeks of pay per year of service:

• Severance weeks: 2 × 7 = 14 weeks
• Base severance: 14 × 1,200 = 16,800
• After 22% tax: 16,800 × (1 − 0.22) = 13,104 net
• Runway at 3,500/month expenses: 13,104 ÷ 3,500 ≈ 3.7 months

Typical Severance by Years of Service

This table uses a common "2 weeks of pay per year of service" guideline. Your actual offer depends on your employer's policy, your contract, and local law.

What Affects Your Severance

How Severance Pay Is Taxed

Severance is taxable wage income. In the United States it is usually treated as supplemental wages and is commonly withheld at a flat federal rate of 22% (or 37% on amounts above 1 million dollars), in addition to Social Security, Medicare, and any applicable state income tax. Withholding is only an estimate — your final tax is reconciled when you file your return. Outside the US, severance may be partly tax-exempt up to a statutory limit. This calculator applies a single estimated rate that you can adjust to match your situation.

How to Use This Calculator

1. Enter your pay: Choose your currency and pay basis (weekly, annual, monthly, or hourly) and enter the amount. The tool converts it to a weekly figure.
2. Enter your years of service: Type the years directly, or switch to date mode and enter your hire and termination dates to calculate the exact tenure.
3. Set the formula: Choose weeks or months of pay per year of service, enter the rate, and optionally add a maximum cap.
4. Add extras: Optionally add unused PTO days, an estimated tax rate, and your monthly living expenses.
5. Calculate: Review your gross and after-tax severance, the breakdown, and your estimated financial runway.

Frequently Asked Questions

How is severance pay calculated?

A common severance formula multiplies your weekly pay by a number of weeks per year of service. For example, 2 weeks of pay per year of service for 7 years equals 14 weeks of pay. Multiply 14 weeks by your weekly pay to get the base severance. Some employers use months per year instead, and many apply a maximum cap on the total number of weeks or months.

How much severance pay is typical?

In the United States there is no federal law requiring severance, but a common practice is one to two weeks of pay per year of service, often capped at a set number of weeks or months. Executives and long-tenured employees may negotiate more. In many other countries statutory severance is set by law and is frequently expressed as a number of weeks or months of pay per year worked.

Is severance pay taxed?

Yes. Severance is treated as taxable wage income. In the United States it is usually taxed as supplemental wages, commonly withheld at a flat federal rate of 22 percent, plus Social Security, Medicare, and any state taxes. The actual tax you owe is settled when you file your return. This calculator applies a single estimated rate that you can change.

Does severance pay affect unemployment benefits?

It can. In some states or countries, severance paid as salary continuation delays or reduces unemployment benefits for the weeks it covers, while a lump-sum payment may not. Rules vary widely by jurisdiction, so check your local unemployment agency for how severance is treated.

What is included in a severance package besides pay?

Beyond the cash severance, a package may include payout of unused PTO or vacation, continued health insurance (such as COBRA in the US), prorated bonuses, stock or equity treatment, outplacement services, and extended benefits. This calculator lets you add unused PTO and shows the after-tax value of the cash portion.

What is a financial runway?

Your financial runway is how long your money can cover your living costs before it runs out. This calculator divides your net (after-tax) severance by your monthly expenses to estimate how many months you can cover while you look for your next role.

Additional Resources

• Severance Package - Wikipedia
• Layoff - Wikipedia