What Severance Usually Looks Like
There is no federal law requiring severance pay in the United States — it is a matter of company policy, employment contracts, and negotiation. That said, a strong market norm has emerged: one to two weeks of pay per year of service. Most large employers land near one week per year, with a floor of about four weeks for short-tenure employees and a practical ceiling around 26 weeks (six months) for long-tenured staff. Executives with employment agreements often do far better — six to twelve months is common at the VP level and above.
Why one week per year? It roughly tracks how long it takes to find a comparable job: about a month of search per year of tenure is the folk wisdom, and severance bridges part of that gap. Companies also use severance to buy something valuable — your signature on a release of claims — which is precisely why the number is negotiable. The calculator above encodes the one-week-per-year norm with a four-week floor and a 26-week cap so you can see exactly where any offer stands.
How to Read Your Package
A severance package is more than the headline weeks. Read the agreement end to end and inventory every component: the cash (weeks of base pay — is commission or bonus included?), continued benefits (health insurance, and for how long?), accrued obligations (unused vacation, which many states require be paid regardless), equity (what happens to unvested shares and your option exercise window?), and the strings attached (the release of claims, non-compete, non-disparagement, and confidentiality clauses).
Then grade it honestly. An offer at or above the tenure norm with continued healthcare is a solid B or better. An offer below 75 percent of the norm — the D range in the calculator — is a signal to negotiate, not a verdict to accept. Remember that HR expects negotiation on severance far more than candidates realize; the first number is an opening position, and departures are one of the few moments when the company is motivated to make you feel fairly treated.
Everything Beyond the Weeks Is Negotiable
The weeks of pay get the attention, but the side terms often matter more. Healthcare continuation tops the list: three to six months of paid COBRA can be worth $3,000 to $6,000 for family coverage, and it removes the terror of a coverage gap. Bonus treatment is next — if you worked most of the bonus year, ask for a pro-rated payout; companies grant this more often than their initial offer suggests.
Equity deserves its own conversation. Standard option agreements give you 90 days after departure to exercise vested options, after which they evaporate. Negotiating an extended exercise window — one to two years — can be worth tens of thousands if the options are valuable but illiquid. For unvested shares, partial acceleration is occasionally granted, especially in acquisitions. Outplacement services, an agreed reference, and the wording of the departure announcement cost the company almost nothing and help you enormously — always ask.
Lump Sum vs Salary Continuation
Companies typically offer severance as a lump sum or as salary continuation (paychecks keep coming for the severance period). The choice has real consequences. A lump sum gives you cash now and a clean break, but it can push you into a higher tax bracket for the year and may disqualify you from unemployment benefits in some states. Salary continuation keeps benefits running longer and spreads the tax hit, but it can delay unemployment eligibility and sometimes comes with clawback strings if you find work quickly.
There is no universally right answer — model both against your situation. If you need cash for the job search and your state allows unemployment alongside a lump sum, take the lump. If healthcare continuation is the priority and continuation extends it, lean that way. And whatever you choose, get the payment schedule, tax withholding treatment, and benefit end dates in writing.
The Release: Read Before You Sign
Every severance agreement includes a general release — you waive the right to sue the company over your employment and termination. That is the product the company is buying, and you should price it accordingly. Federal law gives workers over 40 special protections here: under the Older Workers Benefit Protection Act, you must get at least 21 days to consider the agreement (45 days in a group layoff) and 7 days to revoke after signing. Do not let anyone rush you past those windows.
Pay particular attention to the non-compete and non-disparagement clauses. Non-competes are now restricted or unenforceable in a growing number of states, but where they apply they can sideline you for a year — negotiate the scope narrower, the duration shorter, or additional pay for the restricted period. Non-disparagement should be mutual: the company should agree not to badmouth you, not just the reverse. For any package above a few weeks of pay, a one-hour review with an employment lawyer (typically $300–$600) is the best money you will spend in the process.
Negotiation Scripts That Work
Keep the tone collaborative — you are asking a former employer for a better parting, not making demands. Open with appreciation, anchor to specifics, and make one clear ask at a time: "Thank you for putting this together. Given my eight years here and the performance ratings in my file, I'd like to discuss moving from eight weeks to twelve. Can we also extend the healthcare continuation to six months?" Silence after the ask is fine; let them respond.
Your leverage comes from specifics, not threats. Strong performance reviews, a layoff that skews older (which raises the company's legal risk), unique knowledge the company still needs during transition, and a competing timeline ("I'd like to resolve this by Friday so we can both move on") all help. Put every agreed change in a revised written agreement before signing — verbal promises from HR do not survive the paperwork.
Taxes on Severance
Severance is taxed as ordinary wages: federal income tax, state tax, Social Security and Medicare all apply, and employers typically withhold at the 22 percent flat supplemental rate. A large lump sum can still push your total annual income into a higher bracket, so the withholding may not cover the full bill — set aside the difference. One planning note: if the layoff happens late in the year, ask whether the payment can be split across January; deferring half the income into a lower-earning year can save real money. This is general information, not tax advice — a CPA is worth consulting for large packages.
Your First Two Weeks After a Layoff
Once the package is settled, move fast on logistics: file for unemployment immediately (there is often a waiting week), confirm your health coverage end date and elect COBRA or marketplace coverage before any gap, roll your 401(k) into an IRA rather than cashing it out, download pay stubs and benefits documents while you still have system access, and connect with colleagues on LinkedIn while names are fresh. Then give yourself a brief, deliberate pause. The data is consistent: people who treat the search as a structured project — not a panic — land better roles faster. The severance bought you runway. Use it.
Health Insurance After Your Last Day
Losing a job usually means losing health coverage at month's end, and this decision has a deadline. COBRA lets you keep your exact plan for up to eighteen months, but you pay the full premium plus a two percent fee — often shockingly expensive. The ACA marketplace frequently offers cheaper comparable plans, especially if your income drops, and losing job-based coverage triggers a sixty-day special enrollment window.
Do the math within the first two weeks: compare your COBRA premium against marketplace plans at your new income level, and check whether a spouse's plan can add you. Do not let coverage lapse while deciding — one emergency room visit without insurance can erase the entire severance. Once insured, redirect your energy to the job search itself.