Severance Pay Calculator 2026–2027: Your Take-Home After Taxes
Enter the severance you were offered to see the federal payroll taxes and what you keep after withholding. Uses official 2026 and 2027 figures from the IRS and the Social Security Administration, plus your rights on COBRA, age-40 releases and mass layoffs.
How Is Severance Pay Calculated?
There is no federal law requiring private employers to provide severance pay. Whether you receive any, and how much, comes from your employment contract, your employer’s written policy, or a negotiated agreement. The RemoteLaws calculator therefore does not guess how much severance you “should” get: you enter the formula from your offer.
The most common way to write a severance formula is:
Severance pay = weekly pay × weeks of pay per year of service × years of service
Weekly pay is your annual salary divided by 52. For example, an employee earning $80,000 has weekly pay of $1,538.46. With 6 years of service and an offer of 1.5 weeks per year, the severance is $1,538.46 × 1.5 × 6 = $13,846.15 gross (computed by RemoteLaws). If your offer is a flat amount, enter it directly.
Where to Find Your Severance Formula
Because the amount is set by agreement, the numbers that matter are in your own documents: the offer or separation agreement, an employment contract or offer letter, and the employer’s written severance policy or handbook. Ask HR for the formula in writing, including how years of service are counted and whether unused vacation is paid separately. A union contract can also set severance.
The calculator then turns that formula into a gross amount and the payroll taxes that apply. It does not use industry averages, because no government source publishes them.
Is Severance Pay Taxable?
Yes. According to IRS Publication 15 (2026), severance payments are subject to Social Security and Medicare taxes, federal income tax withholding and FUTA tax. How income tax is withheld depends on how the employer pays it:
- Lump sum: withheld as supplemental wages at the flat 22% rate, or 37% on supplemental wages above $1 million in the calendar year.
- Salary continuation: regular paychecks are withheld using your Form W-4, so the rate depends on your own W-4.
Social Security tax is 6.2% on wages up to the annual wage base: $184,500 in 2026 and $192,300 in 2027 (SSA). Wages you earned earlier in the year count toward the base first, so severance paid late in the year may bear little or no Social Security tax. Medicare tax is 1.45%, and employers must also withhold a 0.9% Additional Medicare Tax on wages above $200,000 in a calendar year (IRS Topic 560). Severance paid in January 2027 or later counts toward the 2027 wage base. State income tax withholding depends on your state; check your state tax agency.
Withholding is not your final tax bill: the actual tax is settled on your return.
Severance Pay and the WARN Act
The Worker Adjustment and Retraining Notification (WARN) Act requires covered employers to give at least 60 days’ notice of a plant closing or mass layoff (20 CFR Part 639). A covered employer has 100 or more employees, not counting part-time employees. A mass layoff means at least 50 employees (not counting part-time) in a 30-day period that also make up at least 33% of the active workforce at the site; the 33% condition does not apply when 500 or more employees are affected. Damages and civil penalties can be assessed against employers who violate the Act.
WARN is separate from severance: it requires notice, not a payment formula. Some states have their own notice laws; check your state labor department. Read our WARN Act guide for more.
OWBPA Rights for Workers Over 40
When an employer asks a worker aged 40 or older to sign a release of age discrimination claims in exchange for severance, the Older Workers Benefit Protection Act (OWBPA) sets minimum rules. According to the EEOC:
- For an individual release, you must have at least 21 days to consider the offer, counted from the employer’s final offer; material changes restart the period.
- In a group layoff, you must have at least 45 days.
- After signing, you have 7 days to revoke. This period cannot be changed or waived by either party.
- In a group layoff the employer must also give written information on the decisional unit, eligibility factors, time limits, and the job titles and ages of those selected and not selected.
What's Included in a Severance Package?
A severance package can include more than cash. Common components to look for in your offer:
- Cash severance: the amount from the formula or a flat sum, paid as a lump sum or as salary continuation.
- Unused vacation or PTO: whether it is paid depends on your state and the employer’s policy. See Final Paycheck Laws by State and the PTO payout calculator.
- Health insurance (COBRA): if you keep your employer plan under COBRA, you can be required to pay up to 102% of the cost of the plan (U.S. Department of Labor). Many employers offer to pay part of it as part of the package.
- Outplacement services: job-search help paid by the employer.
- Non-compete and non-solicitation terms: read them before signing; they are negotiable.
- Equity (stock options and RSUs): whether vesting continues or accelerates is set by your equity plan and the agreement.
Severance Pay and Unemployment Benefits
Severance can affect unemployment benefits, and the rule differs by state and by how the payment is structured. File for unemployment promptly and tell your state agency about the severance arrangement; the state decides eligibility on the facts of your separation. Use our unemployment benefits calculator for the weekly amount in your state, and check your state’s unemployment page for its severance rules.
Frequently Asked Questions
How much severance should I get?
There is no legal formula. The amount comes from your contract, your employer’s policy or a negotiated offer. Enter the weeks of pay per year of service from your offer in the calculator above to see the gross amount and what you keep after payroll taxes.
Is my employer required to offer severance pay?
In most cases no: there is no federal law requiring private employers to pay severance. A written policy, an employment contract or a union agreement can create the obligation, and some employers have promised it in your offer letter.
Can I negotiate my severance package?
Yes. Cash, health coverage, outplacement, non-compete terms and equity are all set by agreement. See how to negotiate a severance package.
How is severance pay taxed?
A lump sum is withheld at the flat 22% federal supplemental rate (37% above $1 million of supplemental wages in the year). Salary continuation follows your W-4. Social Security tax (6.2%) applies up to $184,500 in 2026 and $192,300 in 2027, plus Medicare tax (1.45%) and, above $200,000, an Additional Medicare Tax of 0.9%. State tax depends on your state.
Does severance affect unemployment benefits?
It depends on your state and on how the severance is paid. File promptly and disclose the severance to your state agency.
What is the WARN Act?
A federal law that requires employers with 100 or more employees to give at least 60 days’ notice of a plant closing or a mass layoff of at least 50 employees that is also at least 33% of the active workforce at the site (unless 500 or more are affected).
What are my rights if I am over 40?
To waive age claims in a release, you must be given at least 21 days to consider it (45 days in a group layoff) and 7 days to revoke after signing, according to the EEOC.
Related Resources on RemoteLaws
How to Negotiate a Severance Package (2026) — what is negotiable in a severance agreement.
Final Paycheck Laws by State — deadlines and penalties for all 50 states and DC.
PTO Payout Calculator — the value of your unused PTO.
WARN Act Guide — mass layoff notice requirements.
At-Will Employment — what at-will means for termination.
Exempt vs. Non-Exempt Employees
Unemployment Benefits Calculator
Employment Laws by State