💡 Tip: If your offer is expressed in months, multiply by 4.3 to convert to weeks. For example, 3 months = approximately 13 weeks.
Is Your Severance Package Fair?
Getting laid off is stressful enough without having to wonder if you're being shortchanged on your way out the door. Most people sign their severance agreement without question — not because they're satisfied, but because they simply don't know if the offer is fair.
The truth is severance packages vary enormously by industry, job level, company size, and years of service. What's standard for a Director at a Fortune 500 technology company looks very different from what's typical for a mid-level employee at a small retail business. Without context you have no way of knowing where your offer stands.
What is the Standard Severance Formula?
The most commonly cited benchmark for severance is 1-2 weeks of pay per year of service. So an employee with 5 years of service might expect 5-10 weeks of severance pay. However this is just a baseline — actual packages vary significantly based on seniority, industry, company size, and negotiation. Senior executives often negotiate 3-6 months per year of service and sometimes much more.
Are Employers Required to Pay Severance?
In most cases, no. Federal law does not require employers to pay severance. However if your employer has a written severance policy or your employment contract includes severance provisions, they may be contractually obligated to pay. Some states have additional protections — consult an employment attorney if you believe you are owed severance that wasn't offered.
What is a Release of Claims?
A release of claims is a legal agreement where you waive your right to sue your employer for claims related to your employment. This is extremely valuable to employers — and that value should be reflected in your severance. If you're being asked to sign a release, you have leverage to negotiate a better package. Under the ADEA (for workers over 40), you must be given at least 21 days to consider a release agreement and 7 days to revoke it after signing.
Should I Sign My Severance Agreement Right Away?
No. Don't sign anything until you understand what you're agreeing to and whether the terms are fair. Take the full time allowed to review the agreement. Consider having an employment attorney review it — many offer free consultations. Once signed, a release is very difficult to undo.
What Can I Negotiate in a Severance Agreement?
More than most people realize. Beyond the number of weeks of pay, you can often negotiate: continuation of health insurance, payment of unused PTO, extended stock vesting, outplacement services, the wording of the release (to exclude certain claims), and the reference letter language. Even if your employer says the offer is "standard" and "non-negotiable," it almost always is negotiable — they simply don't lead with that.
Frequently Asked Questions
Can my employer take back a severance offer?
Generally yes — until you sign, an employer can withdraw or modify a severance offer. This is why it's important not to delay unnecessarily in responding, while still taking time to review carefully and consult an attorney if needed.
Does accepting severance affect my unemployment benefits?
It depends on your state. Some states offset unemployment benefits by severance payments during the period covered. Others do not. Check with your state's unemployment agency before making decisions about timing.
What if I was over 40 when I was laid off?
Workers over 40 have additional protections under the Age Discrimination in Employment Act (ADEA). Your employer must give you at least 21 days to review a severance agreement and 7 days to revoke it after signing. In group layoffs, they must give you 45 days. An employment attorney can advise you on whether age discrimination may have been a factor in your layoff.