Losing a job is difficult, regardless of the cause. At Severance Lawyers, we’re here to make your departure from your former employer as beneficial, and easy, to you as possible. As you work through the dynamics of your employers’ proposed severance agreement, you may be wondering how your severance pay is calculated. Severance packages for salaried employees can be different than those for hourly employees.
Key Factors for Severance Pay
Severance payments have widely varying scales. Some factors that impact your package are:
- Hourly or salaried employee
- Position level
- Circumstances of your dismissal
- Tenure with the company
Not every employee receives a severance package. For those employees who are offered a package, most companies have a standard formula for calculating severance agreements for each employee. Whether hourly or salaried, most companies cap the pay at 25 or 26 weeks. Upper management could have a higher severance rate and time frame, anywhere up to six or more months.
How to Calculate Severance Pay for Hourly Employees
The typical calculation for an hourly employee looks like this:
- Number of years with company X 1 week of regular pay = Severance Pay $ Total
So, if you typically make $800 per week and have worked at your company for 5 years,
your severance pay would be $4,000. (5 years X $800 = $4,000)
How to Calculate Severance Pay for Salaried Employees
Severance packages for salaried employees can have more components based on the position level.
As far as the pay goes, this is the typical severance pay calculation:
- Number of years with company X 2 weeks of regular pay = Severance Pay $ Total
Let’s say your salary is $80,000 per year.
- That works out to about $1600 per week, or $3200 for two weeks.
- If you have been with your company for 5 years, your severance pay would be $16,000. (5 years X $3200 = $16,000)
Negotiating Your Severance Agreement
How your severance pay is calculated can also be measured by other aspects of your agreement, like extended medical benefits, job placement services, and equipment like your company cell phone or laptop. Nothing is set in stone until you sign your agreement.
Knowing how to calculate your severance pay will help you negotiate more money or benefits. Severance Lawyers can review and make suggestions to your severance package. Request a free consultation to review your severance agreement and to learn more about how we can help you get the most out of your severance package.