Severance Pay Calculator

Severance pay is compensation an employer provides to an employee who is laid off, made redundant, or let go through no fault of their own. It is typically calculated based on years of service and weekly salary. Severance is not legally required in the US under federal law, but many employers offer it as a goodwill gesture or per company policy.

Yes. In the US, severance pay is subject to federal income tax, Social Security tax (6.2%), and Medicare tax (1.45%). Employers typically withhold a flat 22% federal supplemental withholding rate (or the aggregate method), plus applicable state taxes. Your actual tax liability may differ based on your total income for the year.

In the US, severance and redundancy pay are used interchangeably for packages given to employees whose positions are eliminated. In the UK, statutory redundancy pay is a legal minimum calculated by age and years of service (up to £643/week in 2024). Severance in the UK typically refers to additional contractual or negotiated pay above the statutory minimum.

COBRA (Consolidated Omnibus Budget Reconciliation Act) allows you to continue your employer-sponsored health insurance for up to 18 months after leaving a job. The catch is you pay the full premium (employee + employer share) plus a 2% admin fee. This can cost $500–$800/month for an individual or $1,500–$2,000 for a family.

Beyond the base severance amount, you can often negotiate: extended health insurance coverage, accelerated vesting of stock options, non-disparagement clauses, outplacement services, reference letter agreements, extended use of company equipment, retention of certain company perks, and the timing and structure of payments for tax optimization.