Estimate the value of a severance package based on years of service and weekly pay. Common employer formulas included.
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In the United States, there is no federal law requiring severance pay. Severance is voluntary on the employer's part — driven by company policy, employment contracts, union agreements, or an effort to obtain a release of legal claims.
The most common formula is 1 to 2 weeks of base pay per year of service, often with a minimum (e.g., 4 weeks) and a maximum cap (e.g., 26 weeks). Executives may negotiate "1 month per year" or contractual change-of-control bonuses.
Tax treatment: severance is taxed as ordinary income (W-2). Employers typically withhold 22% federal as supplemental wages, plus FICA. Lump sums can push you into a higher bracket — consider whether to negotiate spreading payments over two tax years.
Before signing: severance agreements often require you to waive your right to sue. If your job loss involved discrimination, harassment, or retaliation, consult an employment attorney before accepting.