Severance Calculator

This tool helps small business owners, entrepreneurs, and HR teams estimate severance payouts for departing employees. It accounts for tenure, base salary, and local labor regulation tiers to produce accurate, compliant estimates. Use it to plan exit costs and avoid unexpected payroll liabilities.

Severance Calculator

Estimate compliant severance payouts for departing employees

Include partial years (e.g., 2.5 for 2 years 6 months)

Severance Estimate Breakdown

Base Salary Severance:
Bonus/Commission Severance:
Unused PTO Payout:
Total Estimated Severance:

How to Use This Tool

Start by entering the departing employee’s annual base salary and selecting your local currency. Add any annual bonus or commission amounts if they are eligible for severance inclusion.

Input the total years of service, including partial years (e.g., 3.5 for 3 years and 6 months). Select the severance tier that aligns with your company policy or local labor regulations. If your tier is not listed, choose 'Custom' to enter weeks per year of service manually.

Check the 'Include Unused PTO Payout' box if your company pays out unused paid time off. The daily rate will auto-calculate based on the base salary (260 working days per year). Enter the number of unused PTO days the employee has accrued.

Click 'Calculate Severance' to view a detailed breakdown of the estimate. Use the 'Reset Form' button to clear all inputs, or 'Copy Results to Clipboard' to save the breakdown for records.

Formula and Logic

The calculator uses standard pro-rated severance formulas aligned with common business and labor practices:

  • Weekly Salary = Annual Base Salary / 52
  • Base Severance = Weekly Salary × Weeks Per Year of Service × Years of Service
  • Bonus Severance = (Annual Bonus / 52) × Weeks Per Year of Service × Years of Service (if bonus is included)
  • Unused PTO Payout = Unused PTO Days × (Annual Base Salary / 260) (if PTO is included)
  • Total Severance = Base Severance + Bonus Severance + Unused PTO Payout

Weeks per year of service is determined by your selected severance tier: 1 week = 1 week per year, 2 weeks = 2 weeks per year, 1 month = 4 weeks per year, 2 months = 8 weeks per year, or your custom value.

Practical Notes

Always verify estimates against your local labor laws, as severance requirements vary by jurisdiction. Some regions mandate minimum severance pay regardless of company policy.

For e-commerce and small business owners, factor severance costs into quarterly payroll budgets to avoid cash flow disruptions. Severance pay is often tax-deductible as a business expense, but consult your accountant for specific guidance.

If your company offers severance for laid-off contractors, confirm their classification first: many jurisdictions do not require severance for independent contractors. Include unused PTO only if your employee handbook or local laws mandate it.

Why This Tool Is Useful

Small business owners and HR teams often lack dedicated payroll software to calculate compliant severance payouts. This tool eliminates manual math errors and ensures consistency across all employee exits.

Entrepreneurs can use estimates to negotiate exit terms with departing leadership, while e-commerce sellers can plan for seasonal staff turnover costs in advance. The detailed breakdown provides transparency for both employers and employees during exit discussions.

Frequently Asked Questions

Is this estimate legally compliant?

This tool provides a mathematical estimate based on your inputs. It does not account for jurisdiction-specific labor laws, union agreements, or individual employment contracts. Always consult local labor regulations or legal counsel to confirm compliance.

Should I include performance bonuses in severance calculations?

Only include bonuses if your company policy, employee contract, or local laws require it. Discretionary bonuses not guaranteed in writing are typically not required to be included in severance payouts.

How do I calculate partial years of service?

Enter partial years as decimals: 6 months = 0.5, 3 months = 0.25, 9 months = 0.75. The calculator will pro-rate the severance amount automatically based on the decimal value.

Additional Guidance

Keep records of all severance calculations and exit agreements for at least 3 years to comply with common labor audit requirements. If you offer severance in installments rather than a lump sum, adjust the total amount to account for any applicable payroll taxes.

For sales teams with commission-heavy compensation, use the average annual commission over the past 2 years instead of a single year’s value to ensure a fair estimate. Always communicate severance estimates to employees in writing to avoid misunderstandings.