Severance Pay Calculator

The single most common mistake people make estimating a severance package: assuming it's withheld the same way as their normal salary. It isn't. The IRS treats severance as a supplemental wage, which means a different, flat withholding rate applies — and that rate is often higher than your actual marginal tax bracket, so the check you receive can look smaller than expected even though you may get some of it back at tax time.

This calculator turns a severance offer — weeks per year of service, plus any lump-sum add-ons — into three numbers that actually matter: the gross payout, the realistic after-tax amount, and how many months of expenses that covers.

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Under IRS Publication 15, employers generally withhold federal tax on supplemental wages at a flat 22% for the portion under $1,000,000, and 37% on anything above that in the same calendar year — regardless of what bracket your regular salary puts you in. FICA still applies in full: Social Security up to the annual wage base, Medicare with no cap.

Worked example, matching this calculator's defaults — $80,000 salary, 7.5 years of service, 2 weeks per year of service, no cap, 5% state rate:

• Weeks of severance: 7.5 × 2 = 15 weeks
• Weekly pay: $80,000 ÷ 52 = $1,538.46
• Gross payout: 15 × $1,538.46 = $23,076.92
• Federal withholding (flat 22%): $5,076.92
• FICA: $1,765.38 · State tax (5%): $1,153.85
• Total withheld: $7,996.15 — an effective rate of 34.65%
• Net payout: $15,080.77

That withholding is not necessarily your final tax bill — it's reconciled against your actual annual income when you file, and if your true marginal rate is below 22% you'll typically get some of it back as a refund. But the check that lands in your account reflects the flat rate, not your regular one.

The more useful question after a layoff usually isn't "how much severance did I get" but "how long does this buy me." The calculator divides your net (after-tax) payout by your monthly living expenses:

At the defaults ($4,000/month expenses), the $15,080.77 net payout covers 3.77 months — before factoring in unemployment benefits, which vary by state and are calculated separately from severance.

There Is No Federal Minimum

Unlike many countries, US federal law does not require employers to offer severance at all (with narrow exceptions like the WARN Act for mass layoffs, which governs notice, not pay). Where a package is offered, one to two weeks of pay per year of service is a common structure — but it's set by company policy or individual negotiation, not by statute, so it varies widely.