Free HR calculator
Severance Pay Calculator
Estimate severance using your company's formula. Add optional PTO payout and benefits support to calculate the total separation package.
About this calculator
Method note: OWBPA release rules for workers age 40 and older Note reviewed
What to expect Have annual pay, credited service, and your severance formula ready. About one minute.
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Severance formula and additional costs
Estimated severance pay
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How the calculation works
Estimating severance pay
Severance is calculated by multiplying credited years of service by the weeks of pay in your formula, then applying the cap. Weekly pay equals annual salary divided by 52. The result appears in dollars, weeks, and months, using 4.33 weeks per month. PTO payout uses annual salary divided by 260 workdays. Benefits support equals the monthly subsidy multiplied by the number of months.
The calculator starts with one week of pay per year of service and a 26-week cap. One week per year was the most common formula in the American Society of Employers 2024 survey. Use your policy's formula and cap for the estimate.
Sources: American Society of Employers, 2024 Severance Pay Policies and Practices Survey, aseonline.org. SHRM, M&A Pickup Puts Focus on Severance Policies, 2014, citing WorldatWork, shrm.org. U.S. Department of Labor, Severance Pay, dol.gov.
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Severance practices in employer surveys
Many severance policies provide one to two weeks of pay per year of service. In the American Society of Employers' 2024 survey of 125 Michigan employers, one week per year was the most common formula (57%), followed by two weeks (24%). Executive severance may follow a separate plan, often with a fixed number of months established by contract. WorldatWork's 2014 survey found that the most common maximum was one year of pay, while 16% of employers capped severance at 26 weeks. The calculator starts with a 26-week cap. Use the formula and cap in your policy.
Additional separation costs
Beyond severance pay, a separation package may include earned PTO payout, benefits support, and outplacement services. Applicable state requirements and company policy determine PTO payout. Benefits and other enhancements may vary by role, tenure, and agreement.
Planning separation requirements
Severance generally follows the employer's policy or agreement, alongside applicable requirements. For qualifying larger layoffs, the federal WARN Act may require advance notice. Some states have additional notice or severance requirements. Separation agreements often include a release of claims. For employees age 40 or older who waive federal age-discrimination claims, OWBPA establishes specific review and revocation requirements.
Plan severance across employees
Compare severance costs across employees
The Severance Planning Calculator workbook applies your severance policy across employees and calculates PTO, benefits, outplacement, and estimated employer payroll taxes. The Full Cost tab shows total expenses and when each cost is expected.
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