Severance Pay Calculator

Is Severance Pay Required?

Usually not. The U.S. Department of Labor states that there is no requirement in the Fair Labor Standards Act for severance pay, and that severance is a matter of agreement between an employer and an employee. When a private employer pays it, the amount comes from its own policy, a contract, a union agreement, or an offer made at separation.

That is why the main calculator asks for your employer’s terms instead of applying a legal rate. A common structure is a number of weeks of pay per year of service, sometimes with a minimum or a cap. Read the policy for how it counts a partial year, since that can change the result by a week or more.

Federal civilian employees are different: 5 U.S.C. 5595 sets a formula. OPM’s fact sheet describes it as one week of basic pay per full year of service through 10 years, two weeks per full year after that, 25% of the applicable amount for each full 3 months beyond the last full year, plus an age adjustment of 2.5% of that basic allowance for each full 3 months of age over 40. The lifetime total cannot exceed 52 weeks. OPM’s own example ($1,500 a week, 20 years 4 months of service, age 45 years 8 months) produces $70,912.50, and the calculator reproduces it.

Not every separated federal employee is covered. The statute excludes, among others, an employee who at separation has fulfilled the requirements for an immediate annuity or is entitled to other severance pay from the Government, and OPM’s fact sheet adds an employee who declines a reasonable offer of another position. The calculator gives no figure if you tick the immediate-annuity box.

WARN Act Back Pay

The Worker Adjustment and Retraining Notification Act requires an employer to give 60 days’ written notice before a covered plant closing or mass layoff. It covers an employer with 100 or more employees not counting part-time workers, or 100 or more employees who together work at least 4,000 hours a week, not counting overtime. A plant closing means 50 or more employees losing their jobs at one site within 30 days; a mass layoff means at least 500 employees at a site, or 50 to 499 who are at least 33% of the site’s workforce.

When notice is short, 29 U.S.C. 2104 makes the employer liable for back pay for each day of violation, at the higher of the employee’s average regular rate over the last 3 years or final regular rate, plus benefits. The period is capped at 60 days and never more than half the days the employee was employed by the employer. The amount is reduced by wages paid for the period and by voluntary, unconditional payments the employer was not legally required to make.

Courts disagree on how to count the days, but most federal appeals courts that have decided the question count only work days within the violation period: the Fifth Circuit (Carpenters District Council v. Dillard Dept. Stores, 15 F.3d 1275), followed by the Sixth, Tenth and Eighth Circuits (Breedlove v. Earthgrains Baking Cos., 140 F.3d 797, which describes working days as the majority rule). The Third Circuit counts every calendar day (United Steelworkers v. North Star Steel Co., 5 F.3d 39). The calculator shows the work-day figure first and the calendar-day figure second. The Department of Labor notes that it has no enforcement role in seeking these damages; workers or their representatives enforce it by suing under 29 U.S.C. 2104, and some states have their own plant-closing laws.

Signing a Release at 40 or Older

Severance offers often come with a release of claims. For a release of federal age discrimination claims to be valid for a worker 40 or older (the ADEA’s age threshold), the Older Workers Benefit Protection Act in 29 U.S.C. 626(f) requires, among other things, at least 21 days to consider the agreement (45 days when the offer is part of a group exit program), written advice to consult a lawyer, and 7 days after signing to revoke it.

Under 29 CFR 1625.22, material changes to the final offer restart the 21 or 45 days, and an employee may sign sooner if the choice is knowing and voluntary. The EEOC adds that no agreement can stop you from filing a charge or taking part in an EEOC investigation.

Worked Example

A $60,000 salary is about $1,153.85 a week. Under a policy of 2 weeks per year of service, 5 years 6 months pro-rated is 11 weeks, or $12,692.31 before taxes. If the policy counts full years only, it is 10 weeks ($11,538.46); if a partial year counts as a full one, 12 weeks ($13,846.15). The weekly figure divides the annual pay by 52.