RIF Compliance

Severance calculator

Estimate the total cost of a reduction in force. Set your formula, floor, and cap, then enter affected employees for a live per-employee and total breakdown. Includes a New Jersey statutory minimum overlay.

1–2 wks

Per year, most common

Most employers use 1 or 2 weeks per year of service as their formula.

NJ only

Statutory minimum

New Jersey requires 1 week per year of service for WARN-covered RIFs. No other state mandates it.

26 wks

Typical cap

Most severance plans cap total payout at 26 weeks regardless of tenure.

CalculatorFormula guideNJ severanceOWBPA (40+)FAQ

Calculator

Set the formula, then add affected employees. Results update as you type and stay in your browser.

Set your severance formula

Affected employees

This calculator estimates severance cost from a weeks-per-year formula with an optional floor and cap. Weekly salary is derived as annual salary divided by 52. It does not account for bonuses, commissions, benefits continuation, employer taxes, or tenure-tiered formulas. The NJ overlay reflects the statutory minimum of 1 week per year of service for WARN-covered RIFs and is informational only. This tool does not constitute legal or tax advice. Have your severance plan reviewed by employment counsel before finalizing.

How severance formulas work

Four levers shape almost every severance plan. Understanding each one helps you model cost and stay compliant.

Weeks-per-year formula

The core of nearly every severance plan is a fixed number of weeks of pay for each year of service. One to two weeks per year is the most common range, and weekly pay is usually derived from annual base salary divided by 52.

Minimum floor

A floor guarantees a baseline payout even for short-tenured employees, so a new hire with under a year of service still receives something. Common floors are two, four, or six weeks regardless of the formula result.

Cap

A cap limits the total payout no matter how long an employee has been with the company. Most plans cap at 26 weeks, which keeps long-tenure costs predictable and prevents a single payout from dominating the RIF budget.

How New Jersey differs

New Jersey is the only state that mandates severance by statute: one week of base pay per year of service for WARN-covered layoffs. Employees cannot waive below that minimum, so your formula must meet or exceed it for affected New Jersey staff.

New Jersey statutory severance

New Jersey is the only state that requires severance by statute. If your RIF touches New Jersey, these rules are not optional.

NJ

NJ WARN mandatory severance

  • •NJ WARN covers employers with 100 or more employees when 50 or more are affected by a termination or transfer of operations.
  • •The statutory severance is 1 week of base pay per year of service, prorated for partial years of employment.
  • •It is mandatory even when the full 90-day notice is given. Severance is not a substitute for notice, it is required in addition to it.
  • •Employees cannot waive below the statutory minimum, even in a signed separation agreement. Any waiver of the minimum is unenforceable.

OWBPA note for employees 40 and older

When a RIF includes anyone 40 or older, the Older Workers Benefit Protection Act sets requirements for a valid release of age claims.

  • •Group termination disclosure: employees 40+ must receive the decisional unit, the job titles and ages of those selected, and the ages of those not selected.
  • •45-day consideration period: in a group RIF, employees 40+ get 45 days to review the agreement before signing (21 days for individual terminations).
  • •7-day revocation window: after signing, an employee 40+ has 7 days to revoke. The release is not effective or enforceable until that window closes.
View the OWBPA disclosure template

Frequently asked questions

Is severance required by law?

In almost all cases, no. Federal law does not require severance, and only New Jersey mandates it by statute, and only for WARN-covered reductions in force. Everywhere else, severance is voluntary and typically conditioned on signing a release of claims. Even so, most employers offer it to secure a release and to support affected employees.

What is the most common severance formula?

The most common formula is 1 to 2 weeks of base pay per year of service, with weekly pay calculated as annual salary divided by 52. Some companies use tenure tiers, for example a higher rate after a certain number of years, or a flat number of weeks for executives. A floor and a cap are often layered on top.

Does severance affect unemployment benefits?

It varies by state. In most states, severance paid as a single lump sum does not delay unemployment insurance eligibility. Salary continuation, where the employer keeps the person on payroll for a period, can delay or reduce benefits because the individual is treated as still earning wages. Check the rules in each affected state before deciding lump sum versus continuation.

What is a severance cap?

A cap is a ceiling on the total payout regardless of tenure. With a 26-week cap, an employee with 30 years of service under a 2-week formula would receive 26 weeks rather than 60. Caps keep long-tenure costs predictable and are a standard feature of most formal severance plans.

What must a severance agreement include for employees 40 and older?

For a valid release of age claims under the OWBPA, a group termination agreement must include the decisional unit disclosure (job titles and ages of those selected and not selected), a 45-day consideration period, and a 7-day revocation window after signing. Missing any of these can make the age-claim release unenforceable.

Free download

Get the severance agreement checklist

Every provision HR and legal teams need before finalizing a severance agreement: release of claims, OWBPA requirements for employees 40+, consideration periods, COBRA, and a 12-section final review.