Severance Pay Calculator 2026

Free severance pay calculator 2026. Estimate your full US package: base pay by state, vacation payout, notice pay, COBRA & after-tax net. Instant results.

Last updated:

How severance pay is calculated in the United States

No US state sets a statutory severance formula, because no state requires severance in the first place. What exists instead is a market convention that most employers follow, and which this calculator applies: one to two weeks of base pay for every full year of service.

Worked example. An employee earning $96,000 a year with eight years of service has a weekly base of $96,000 ÷ 52 = $1,846. At one week per year that is 8 × $1,846 = $14,768 gross; at two weeks per year, $29,536 gross. Both are before withholding, which typically takes 30% or more.

The multiplier moves with seniority. Individual contributors are usually offered one week per year, directors and senior managers around two, and executives often negotiate a flat multiple of annual salary — six months to a year — instead of a per-year figure. Large employers running structured reductions generally apply one formula uniformly, which makes the cash number harder to move but the non-cash terms easier.

  • Base salary only — bonuses, commissions and equity are normally excluded unless your agreement says otherwise
  • Accrued unused vacation is separate from severance, though whether it must be paid out depends on your state and your employer's written policy
  • Your final paycheck is separate again, and the deadline for it varies by state

Is severance pay required by law?

No federal law requires severance pay, and no state requires it either. It becomes legally enforceable only where it has been promised — in an employment contract, an offer letter, a written policy or handbook, or a collective bargaining agreement.

A written policy promising severance can bind an employer even without an individual contract, so it is worth reading the handbook before concluding you are owed nothing.

What does not depend on your employer's goodwill is layoff notice. Federal WARN, and the stricter state equivalents some states have enacted, create statutory entitlements triggered by the size and manner of a layoff rather than by generosity.

WARN Act notice: federal law versus state law

The federal Worker Adjustment and Retraining Notification Act applies to employers with 100 or more full-time employees and requires 60 days of advance written notice before a plant closing or a mass layoff affecting 50 or more workers at a single site. Where notice is not given, affected employees may recover up to 60 days of lost wages and benefits.

Several states have gone further, and the differences are large enough to change the answer entirely depending on where you work.

California's Cal-WARN covers employers with 75 or more employees and requires 60 days notice for a mass layoff of 50 or more, a closure, or a relocation of more than 100 miles. As of January 1, 2026, SB 617 also expanded what a California notice must contain.

New York is the strictest of the large states: NY-WARN covers employers with 50 or more full-time employees in state and requires 90 days notice, with triggers starting at 25 employees.

Texas has enacted no state notice law at all, so only federal WARN applies. A 60-employee Texas employer owes no notice where the same employer in New York would owe 90 days.

  • WARN pay is owed in addition to severance — check that your agreement is not counting one toward the other
  • Thresholds are generally counted per single site of employment, not company-wide
  • Remote employees are typically counted against the site they are based out of, which can bring a dispersed workforce within coverage

How severance is taxed

Severance is ordinary wages, not a settlement or a gift. Federal income tax, state income tax where applicable, and FICA all apply.

Employers usually treat severance as supplemental wages for federal withholding, applying a flat 22% up to $1 million and 37% on any portion above. FICA adds 7.65% for Social Security and Medicare, subject to the annual wage base.

State tax is where the outcome diverges sharply. Texas has no state income tax at all, so a Texas severance faces only federal withholding and FICA. California and New York both apply state tax on top, and New York City residents add city tax again. On a $29,536 package that difference is worth thousands.

Note that two different state percentages get quoted and they answer different questions. A state's supplemental withholding rate is what the employer deducts at the moment of payment — 6.6% in California, 11.70% in New York. Your actual liability depends on which bracket your total annual income lands in, which is nearer 9.3% in California and 6.85% in New York for a mid-to-high earner. The calculator above estimates actual liability, because what most people want to know is what they keep. If your payslip deduction differs, that gap is settled when you file.

Withholding is not your final tax bill. The flat supplemental rate is an estimate against whatever bracket your total annual income ends up in. A layoff early in the year often means over-withholding and a refund; a large package on top of a full year's earnings can mean the opposite.

Does severance affect unemployment benefits?

This depends heavily on your state, and the differences are not intuitive — which is why it is worth checking your own state rather than assuming.

California generally does not treat severance as wages for benefit purposes, so it does not usually disqualify you. New York keys off timing: a first payment landing more than 30 days after your last day has no effect at all, while weekly severance above the maximum weekly benefit rate disqualifies you for those weeks. Texas distinguishes severance pay from wages in lieu of notice and can delay benefits by a period derived from your weekly pay rate.

One rule holds everywhere: salary continuation, where the employer keeps you on payroll and treats you as still employed, is treated differently from a severance payment and generally blocks benefits while it runs.

File your claim promptly rather than waiting for severance to end, and report payments accurately. State agencies cross-reference employer reporting, and an overpayment has to be repaid.

Negotiating a severance package

Severance is paid in exchange for a signed release of claims, which makes it a transaction — and transactions have prices. The first offer is rarely the ceiling, and most employers build some room into a standard package.

Leverage is factual rather than emotional: potential discrimination or retaliation claims, unpaid commissions, a deficient WARN notice, long tenure with a documented performance record, or timing that undercuts the stated reason for the termination.

If you are 40 or older and the agreement waives age discrimination claims, federal law gives you 21 days to consider it — 45 in a group termination — and 7 days to revoke after signing. Use that time to have it reviewed.

  • Payment timing and structure, which affects both tax year and unemployment eligibility
  • COBRA continuation and who pays the premium
  • Accelerated equity vesting or an extended option exercise window
  • Non-compete removal, which matters far more in Texas than in California

Frequently Asked Questions

Is severance pay required by law in the US?

No. No federal or state law requires severance. It is owed only where promised in an employment contract, offer letter, written policy, handbook or union agreement. Layoff notice under federal WARN or a stricter state equivalent is a separate statutory entitlement that does not depend on your employer choosing to offer anything.

How much severance is typical?

One to two weeks of base pay per full year of service is the common convention. Individual contributors are usually offered one week per year, directors and senior managers around two, and executives often negotiate a flat multiple of annual salary instead. There is no legal minimum, so these are market norms rather than entitlements.

How is severance pay taxed?

As ordinary wages. Employers typically withhold a flat 22% federal rate on supplemental wages up to $1 million and 37% above, plus FICA at 7.65%, plus state tax where it applies. State treatment varies widely — Texas has no income tax, California applies 6.6%, and New York applies 11.70% plus city withholding.

Does severance stop me collecting unemployment?

It depends on your state and how the payment is structured. California generally does not treat severance as disqualifying wages. New York keys off timing, with payments more than 30 days after your last day having no effect. Texas may delay benefits by a period derived from your weekly pay rate. Salary continuation blocks benefits nearly everywhere while it runs.

What is the difference between federal WARN and state WARN laws?

Federal WARN covers employers with 100+ employees and requires 60 days notice for closings or mass layoffs affecting 50+ workers at a site. California's Cal-WARN starts at 75 employees, and New York's starts at 50 and requires 90 days. Texas has no state law, so only the federal minimum applies there.

Can I negotiate my severance package?

Usually. Severance buys a release of claims, which makes the number negotiable. Leverage comes from specific facts — potential discrimination or retaliation claims, unpaid commissions, a defective WARN notice, long tenure with strong reviews. Beyond cash, payment timing, COBRA, equity vesting and non-compete terms are often easier for employers to concede.

How long do I have to sign a severance agreement?

If you are 40 or older and the agreement waives age discrimination claims, the Older Workers Benefit Protection Act gives you at least 21 days to consider it — 45 days in a group termination — plus 7 days to revoke after signing. Under 40 there is no federal minimum, but you can ask for time to have it reviewed.

Is unused vacation part of my severance?

No, it is separate. Whether it must be paid out depends on your state and your employer's written policy — California requires payout as earned wages, while Texas requires it only where a policy or agreement provides for it. Your final paycheck is separate again, with deadlines that vary by state.

Disclaimer

This calculator provides a general estimate for planning purposes only. It is not legal, tax or financial advice, and it cannot account for the terms of your specific employment contract or separation agreement. Severance, notice and unemployment rules vary by state. Consult a licensed employment attorney in your state before signing any severance agreement or waiving any claim.

Related free tools

More free calculators