Severance Pay Calculator

No. The United States has no federal law (including FLSA) requiring severance pay. It is purely voluntary unless: (1) your employment contract or offer letter specifies severance, (2) a collective bargaining agreement (union contract) requires it, or (3) the employer has an established written severance policy. WARN Act (60-day notice for mass layoffs of 100+ employees) can trigger pay obligations when not followed, but is not the same as severance.

The most common severance formula in the US is 1 week of pay per year of service for non-executive employees, and 2 weeks per year for senior/manager-level employees. Executive severance is typically negotiated separately and can include 3–12 months of base salary. These are industry norms, not legal requirements.

Yes — and you should. Most employers start with a standard formula but have flexibility, especially if you've been with the company several years or hold specialized knowledge. Key items to negotiate: extended health insurance (COBRA offset), accelerated vesting of stock options, non-disparagement clause removal, and outplacement services. Never sign a severance agreement without reading it first — most include a release of legal claims against the employer.

Yes, severance pay is taxed as ordinary income — subject to federal income tax, Social Security, and Medicare withholding, plus state taxes. Employers typically withhold at the standard supplemental wage rate (22% federal for amounts up to $1 million). If paid as a lump sum in a high-income year, consider adjusting your W-4 or making estimated tax payments to avoid an underpayment penalty.