Severance Package Calculator – Calculate Your Severance Pay & Taxes | SoCalSolver

Severance is legally required only in specific situations: (1) Federal civil service employees (mandatory per 5 U.S.C. 5595), (2) WARN Act triggers (60-day notice for 50+ employee layoffs), (3) Employment contracts specifying severance (union, executive agreements), (4) Some state-specific scenarios or collective bargaining agreements. Most private sector companies offer severance as a business practice, not legal requirement, but amounts vary widely. Check your employee handbook or ask HR about your company's severance policy.

Annual basic pay includes: base salary, locality pay (federal employees), special rate supplements, standby duty premiums, and administratively uncontrollable overtime (federal). Exclusions: bonuses (unless your severance agreement specifies otherwise), commissions, incentive pay, cash awards, shift differentials, and regular overtime. If unsure, check your latest W-2 or ask your HR department which components count. Using the wrong pay figure can significantly affect your calculation.

Federal OPM severance includes an age adjustment factor because older workers face greater reemployment challenges. The factor starts at 1.0 for employees under 40 and increases to 3.5 for employees 65+. Example: At age 40 it's 1.0×, at age 45 it's 1.55×, at age 50 it's 1.975×, at age 55 it's 2.4×. This is NOT age discrimination—it's an intentional policy advantage that increases severance for older workers. Private sector severance typically does not include age factors (except as part of negotiation).

Severance is 100% taxable as regular income. Standard withholding: 22% federal income tax (flat rate for supplemental payments), 6.2% Social Security (FICA), 1.45% Medicare, plus your state income tax (0-15% depending on location). Total withholding typically ranges 30-40%, leaving you with 60-70% of the gross amount. Example: $50,000 gross severance with 38% total tax = $19,000 withheld, net $31,000. Your actual tax liability may differ based on overall income that year; consult a tax professional if you anticipate owing more or are owed a refund.

Most common: 1-2 weeks of pay per year of service. Federal uses a tiered approach (1 week per year for first 10 years, 2 weeks per year beyond). Executive/management severance can be negotiated higher (2-6 months or more). Very rough estimates: 5 years service = 5-10 weeks pay; 10 years = 10-20 weeks pay; 15 years = 15-30 weeks pay; 20+ years = 20-40+ weeks pay. But this varies enormously by industry, role, location, and negotiation. Always ask HR for your company's specific policy.

Often yes, especially for management positions (20-50% increases are realistic) or long tenure. Federal severance is generally not negotiable (it's mandated by statute). Private sector severance offers are typically starting points. Negotiation tips: (1) Have documentation (performance reviews, tenure records, market data for your role), (2) Negotiate immediately when offered—don't wait, (3) Request more weeks of pay, extended health insurance coverage, outplacement services, or a positive reference, (4) Get any agreement in writing, (5) Consult an employment attorney if substantial amount is involved. Even modest increases can mean thousands in additional income.

Severance and unemployment are separate programs, but severance affects unemployment timing and amounts (state-specific). Most states: severance is treated as income that delays or reduces unemployment benefits dollar-for-dollar. Example: $20,000 severance over 10 weeks delays unemployment by ~10 weeks. Some states (NY, TX): severance in installments delays benefits until installments end. Federal/state rules vary significantly. Action: (1) Check your state unemployment agency website, (2) When applying for unemployment, report your severance, (3) After severance exhausts, reapply for unemployment benefits immediately. Severance ends, unemployment begins—they're sequential, not simultaneous.

Severance is typically not paid for termination for cause (theft, misconduct, policy violation, poor performance). However, exceptions exist: some employment contracts guarantee severance regardless; some states/jurisdictions limit 'for cause' definitions narrowly. If terminated for cause, review: (1) Your employment contract/severance agreement, (2) Company handbook on severance eligibility, (3) State employment laws, (4) Consider consulting an employment attorney if you believe the termination was unjust or if you have a contract. You may have legal recourse even if severance is denied.

Under the WARN Act (Worker Adjustment and Retraining Notification), employers must provide 60 days advance notice for mass layoffs affecting 50+ employees. If notice wasn't provided, you may be entitled to severance equal to 60 days of wages plus health insurance continuation costs, or back pay for the 'lost' notice period. This is separate from, and potentially in addition to, regular severance. Timing: you have typically 2-3 years to file a WARN Act claim. Action: (1) Consult an employment attorney immediately if WARN notice was not provided, (2) Document the layoff date and notice (or lack thereof), (3) Calculate 60 days of your regular pay and benefits costs, (4) An attorney can help you recover this amount via claim or lawsuit.

This depends on your situation. Lump sum advantages: immediate access to full amount, simpler tax reporting, you control investment timing. Installment advantages: extended cash flow over weeks/months (reduces immediate budget shock), may reduce unemployment delays if installments stretch beyond severance period. Federal severance is typically paid in biweekly installments (matches standard payroll). Private sector may offer choice. If you have another job lined up, lump sum allows faster deployment to new employer's retirement plan (can delay taxes via rollover to IRA). If you're uncertain about next job, installments provide longer cash flow. Consult a financial advisor or tax professional for your specific situation.