Severance Package Value Calculator
Calculate the true after-tax value of a severance package. Compare lump sum vs salary continuation and understand unemployment eligibility.
Severance Package Negotiation Guide
How Severance Is Taxed
Severance is taxed as ordinary W-2 income — federal income tax at your marginal rate, FICA (Social Security + Medicare), and state income tax. Employer withholds federal at the 22% supplemental wage rate (37% if over $1M cumulative supplemental). Most recipients owe additional federal tax at filing if their marginal rate exceeds 22%. Key planning consideration: a lump sum severance can spike your taxable income in one year, potentially pushing you into higher brackets, IRMAA brackets (if Medicar
Lump Sum vs Salary Continuation
Lump sum advantages: cash in hand immediately, protected up to FSCS limits of company bankruptcy mid-payout, full control over investment, ends employment relationship cleanly. Salary continuation advantages: spreads tax across two years (if straddling year-end), keeps benefits (health insurance, 401k contributions) flowing, often counted as 'employed' for mortgage applications. Critical: salary continuation usually DELAYS unemployment benefits — you can't collect UI while receiving severance pa
Negotiating a Better Package
Most severance offers are negotiable, especially for senior or specialized roles. Realistic asks: (1) Additional weeks of pay — 2-4 weeks typical extra. (2) Extended COBRA — employer-paid for 3-6 months can be $4,500-15,000 of value. (3) Outplacement services — typically $2,000-10,000 of value, ask for cash instead. (4) Equity acceleration — vesting of unvested RSUs/options often worth more than severance itself. (5) Reference letter and positive references in writing. (6) Removal of non-compete
Common Severance Mistakes
(1) Signing immediately without legal review — most severance agreements include releases of claims, non-disparagement, non-compete. Over 40 (ADEA): you have 21 days to consider, 7 days to revoke. (2) Forgetting about COBRA - factor employer-paid COBRA value into total package. (3) Cashing out 401(k) — penalty + tax burden is enormous; instead roll to IRA. (4) Missing unemployment filing deadline — file within 1 week of separation even if receiving severance. (5) Stopping job search to enjoy sev
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