Severance pay isn’t required by federal law in most cases — it’s a matter of individual employer policy or a negotiated agreement, which is why the underlying formula is an input here rather than a fixed rule.
How it works
Years of service are multiplied by however many weeks of pay the policy or offer provides per year — a common figure is one to two weeks — to get total severance weeks, then multiplied by weekly pay. A minimum number of guaranteed weeks, if the policy has one, sets a floor under that calculation.
Why there’s no single “standard” formula
Unlike Social Security or federal tax, there’s no government-set severance formula to apply uniformly — employer policies, union contracts, and individually negotiated severance agreements can all use different terms, so the actual policy or offer in hand is what should be entered here.
How to use this calculator
- Enter weekly pay and years of service.
- Enter the weeks-per-year formula from the actual policy or offer, and any guaranteed minimum.
Frequently asked questions
Is severance pay taxed?
Yes — it’s generally treated as taxable wages, subject to the same withholding as regular pay.
Does the WARN Act require severance pay?
No — the WARN Act requires advance notice of certain large layoffs, not a severance payment itself; the two are commonly confused but are legally separate.
Can severance affect unemployment benefits?
In some states, yes — severance can delay or reduce unemployment eligibility depending on how it’s structured and paid out, which varies by state.
