Understanding your severance offer, your rights, and how to negotiate.
Severance pay is compensation offered by an employer when they terminate an employee. In the U.S., there is no federal law requiring severance — it is entirely at the employer's discretion unless stipulated in an employment contract or company policy. However, most mid-to-large employers offer 1–2 weeks per year of service as standard practice.
The most common formula is 1 week of base pay per year of service. Some employers offer 2 weeks per year, especially in tech. Senior roles and longer tenures often receive more. Severance may also include continued benefits, a bonus proration, or equity vesting acceleration — all of which are sometimes negotiable. Use the LayoffCalc calculator to estimate your severance based on your salary and tenure.
Yes. Most severance packages are negotiable. You can push for additional weeks of pay, extended COBRA subsidization, equity acceleration, or a broader reference agreement. The employer's first offer is rarely final. Be polite, move quickly, and frame requests around business context — "given my 5 years managing this integration" rather than personal need. See our Workforce Guide for specific negotiation language.
No. You are never required to sign immediately. Workers 40 and older have a legal right to 21 days to review under the OWBPA, plus 7 days to revoke after signing. All employees should take at least a few days. Never sign under pressure — once signed, these agreements are very difficult to undo.
Yes. Severance is treated as ordinary income and is subject to federal and state income taxes, Social Security, and Medicare (FICA). Your employer will withhold taxes before paying, and the amount will appear on your W-2. In some cases, receiving a large lump-sum severance in December could push you into a higher tax bracket for the year.
Eligibility, how much you'll receive, and common filing mistakes.
Generally yes, if you were laid off through no fault of your own. You must meet your state's base period earnings requirements (typically wages earned in the last 12–18 months) and be available and actively seeking work. Voluntary quits and terminations for cause may disqualify you — but a layoff due to company restructuring qualifies in all states.
Unemployment benefits vary widely by state. Weekly benefit amounts range from $235 (Mississippi) to $1,079 (Washington) in 2026. Duration ranges from 12 weeks (Florida, North Carolina) to 30 weeks (Massachusetts). See our By State page for all 50 states and DC, including maximum weekly benefits and duration.
As soon as possible — ideally within the first week after your last day. Most states have a 1-week waiting period before benefits begin, and the clock starts from your filing date, not your layoff date. Filing late means permanently losing those early weeks of benefits you cannot recover retroactively.
It depends on your state. Some states treat severance as wages and delay your unemployment benefits until the severance period ends. Others allow you to collect both simultaneously. Check your state's rules directly — search "[state] unemployment severance offset" — and file your claim immediately regardless, so you're in the system.
Yes, in most states — but you must report all income when you certify each week. Most states reduce your weekly benefit by some portion of your earnings rather than disqualifying you entirely. Working part-time does not automatically disqualify you, but failing to report income is considered fraud and can result in repayment plus significant penalties.
COBRA vs ACA marketplace — costs, deadlines, and how to decide.
COBRA lets you continue your employer's health insurance for up to 18 months after a layoff, but you pay the full premium (your share + employer's share + 2% admin fee). It's often $600–$800/month for an individual, and $1,500–$2,200/month for a family. The ACA marketplace may be significantly cheaper if your income drops after the layoff. Read our full COBRA Guide for a complete comparison.
You have 60 days from the date your employer sends the COBRA election notice — or from the date your coverage ends, whichever is later. Missing this deadline means permanently losing COBRA eligibility for that plan. Your employer must send the notice within 14 days of your qualifying event.
Usually yes, especially after a layoff when your income drops. ACA Premium Tax Credits (subsidies) are based on your projected income for the full calendar year — and that income drops significantly when you're laid off mid-year. Many people qualify for $0–$150/month plans. Always compare both before deciding. See our COBRA Guide for worked examples.
A Special Enrollment Period (SEP) is a time outside of the annual Open Enrollment window when you can sign up for ACA marketplace coverage due to a qualifying life event. A layoff — specifically, loss of job-based health coverage — triggers a 60-day SEP starting from the date your coverage ends. Apply at healthcare.gov or your state exchange.
Managing money, calculating runway, and making smart decisions during a layoff.
Add your liquid savings + severance + expected total unemployment benefits. Divide by your monthly expenses (rent, food, utilities, insurance, loan payments). The result is your runway in months. Use the LayoffCalc calculator to do this automatically based on your salary, state, and monthly expenses — it combines all income sources and gives you a runway estimate.
Generally no — avoid early retirement account withdrawals if at all possible. Before age 59½, you'll owe ordinary income tax plus a 10% early withdrawal penalty, which can reduce the amount by 30–40%. Exhaust all other options first: severance, unemployment benefits, emergency savings, and reducing monthly expenses. If you have a 401(k) loan option, that may be preferable to a withdrawal in extreme situations.
The average U.S. job search takes 3–6 months in a normal hiring market, longer in a slow or high-unemployment market. Senior and highly specialized roles often take 5–9 months. Start immediately, activate your network before applying to public job postings, and target quality over quantity in applications. See our Workforce Guide for a structured job search framework.
Three immediate priorities: (1) Don't sign anything immediately — read everything carefully and take your full review period. (2) Document all communication from your employer including severance terms and any verbal commitments — email yourself a summary. (3) Identify your health insurance deadline (60 days from coverage end). Then see our full 30-day action plan in the Workforce Guide.
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