How is Severance Pay Calculated? | Bantle & Levy



How is Severance Pay Calculated?

Losing a job is something we all dread, but it’s a reality that many in the workplace go through. While it may not totally alleviate the stress of losing your income and needing to search for a new position, a severance package could help ease some of the burdens of this situation. This can provide you with compensation that can help hold you over until you find new employment. However, severance packages do not always contain as much as you would think, so your severance pay might not be nearly as much as you need or deserve.

How exactly do employers determine how much to offer in severance pay to their terminated employees? Learn more about how severance packages and pay work.

Are You Entitled to Severance Pay?

Offering severance pay to terminated employees is a common practice, so some might assume that it’s required. However, this isn’t something that you should just expect your employer will offer if your employment is terminated. There is no federal or state law that requires your employer to provide a severance package, although many employers choose to. Your employment contract may have stated that you’re entitled to a severance package and what that entails. In this case, your employer is contractually obligated to provide what they promised.

How Do Employers Calculate Severance Pay?

As severance pay is not required, there’s no one right way of calculating it. How severance pay is calculated can vary from company to company. Employers typically base severance pay on how long an employee has been with a company. Standard severance pay for most employees is one week of pay for every year the employee has been with the company. For example, an employee who has been with a company for five years would continue to receive their weekly rate of pay for five weeks after leaving the company. However, determining severance pay for senior and executive employees can be much more complex.

What Else May a Severance Package Include?

While continuing to have a source of income may be many people’s top concern after being terminated, it might not be the only part of your severance package. Severance packages may also include the following:

  • Compensation for unused time off
  • Continuation of healthcare
  • Reference check clause
  • Stock options
  • Outplacement assistance

It’s also important to remember that you do not have to accept a severance package that your employer offers. Although most people require the benefits that these provide after losing their jobs, it might not always be in your best interest to sign one. For example, your severance agreement might offer you benefits in exchange for your promise to not take legal action against the company. You also likely don’t need to sign a severance agreement right away. Instead, you can take time to consider if your employer’s offer is worth it or negotiate for better terms.

Questions About Severance Agreements? Contact Bantle & Levy

When you’re left without a job, you want a severance package that will provide what you need during this transitional period. Unfortunately, employers don’t always offer this initially. At Bantle & Levy, we know how vital it is to ensure your severance package offers what you deserve and is in your best interest. We can help review severance agreements and help negotiate so that you can receive a fair amount

Contact our employment lawyers today for more information.

Bantle & Levy
Bantle & Levy

Lee Bantle is a partner at Bantle & Levy LLP. He has extensive legal expertise, admitted to the bars of the U.S. District Court and the U.S. Court of Appeals. With a distinguished academic background and clerkship experience, he has been recognized as a top-rated civil rights attorney and esteemed lawyer. In addition to his successful career, he has actively contributed to various legal organizations and serves as a faculty member for NYU's Annual Workshop on Employment Law for Federal Judges.


  • This field is for validation purposes and should be left unchanged.

Contact Information

99 Park Avenue, Suite 1510
New York, 10016
(On Park Avenue between 39th Street and 40th Street)