Common Severance Formulas
Severance = (Annual Salary ÷ 52) × Weeks of Pay per Year of Service × Years of Service
A common (though not legally mandated in most cases) severance formula offers 1-2 weeks of pay for each year of service — 2 weeks per year is a frequently cited standard, though actual practice varies enormously by company, industry, seniority level, and circumstances.
Severance Is Not Legally Required in Most Cases
Unlike some countries, the United States generally doesn't legally require severance pay (absent a specific contract, union agreement, or company policy promising it) — it's typically offered at employer discretion, especially for layoffs, as a goodwill gesture or to secure a release of legal claims.
What Else May Be Included
A full severance package can include continued health insurance (COBRA subsidies), unused vacation payout, outplacement services, and sometimes accelerated vesting of stock options — this calculator estimates only the base severance pay component.
The WARN Act
For larger layoffs at bigger companies, the federal WARN Act may require 60 days advance notice or pay in lieu of notice — a separate consideration from standard severance formulas.