What is the standard severance formula in California?

The most common formula is one to two weeks of base pay per year of service. However, this varies significantly by seniority level (entry-level employees typically receive 0.5 to 1.5 weeks per year, while directors receive 1.5 to 3 weeks) and by industry (financial services averages around 22 weeks, while manufacturing averages 10 to 15 weeks). California doesn't mandate severance, so your specific offer depends on your employer's practices and your negotiating leverage.

How much of my severance will I lose to taxes?

Severance is taxed as supplemental wages. Your employer will typically withhold 22% for federal income tax, plus California state tax (9.3% to 13.3% depending on your bracket), Social Security (6.2%), and Medicare (1.45%). In total, expect to lose approximately 35% to 40% of the gross amount. A $50,000 severance offer might net around $30,000 to $32,500 after all withholding.

Should I take my severance as a lump sum or salary continuation?

Each has trade-offs. A lump sum gives you the full amount at once and generally allows faster access to California EDD unemployment benefits. Salary continuation spreads the tax burden over multiple pay periods but may delay unemployment eligibility. The right choice depends on your financial situation, tax bracket, and how quickly you expect to find new employment. An employment attorney can help you evaluate which structure is better.

How to Calculate What Your Severance Package Is Actually Worth

You have a severance offer in front of you with a dollar amount on it. The question isn't just whether that number feels right. It's whether that number holds up against what employers actually pay. Most people have no idea what a competitive severance package looks like because they've never negotiated one before. Here's how to benchmark your offer against real market data so you know exactly where you stand.

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Severance agreements are negotiable. The number on your offer is a starting point, not a take-it-or-leave-it. Employees who have an attorney review and negotiate their severance routinely walk away with more money, longer benefits, and better terms. It happens every day.

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The Standard Formula Most Employers Use

The most common severance formula in the United States is one to two weeks of base pay per year of service. If you worked somewhere for six years and earned $1,200 per week, you'd expect between $7,200 and $14,400 under that formula. That's the baseline. But "standard" varies widely depending on your role, your industry, and the size of your employer.

Here's how the numbers actually break down by seniority level:

Entry-level and individual contributors: 0.5 to 1.5 weeks per year of service. If you were in a non-management role for four years, expect 2 to 6 weeks of pay.

Mid-level and senior individual contributors: 1 to 2 weeks per year. An experienced engineer or analyst with seven years of tenure would fall in the 7 to 14 week range.

Managers and directors: 1.5 to 3 weeks per year. A director with ten years at the company should be looking at 15 to 30 weeks.

VPs and senior directors: 2 to 4 weeks per year. At this level, packages frequently include negotiated extras beyond the base severance formula.

C-suite executives: 4 to 12 weeks per year, or a flat multiple of annual salary (typically 6 to 18 months). Executive severance is almost always pre-negotiated in the employment agreement.

Industry Benchmarks That Matter

Your industry matters as much as your title. The average severance across all industries rose to 19.3 weeks in 2024, up from 15.6 weeks the prior year. But the spread is enormous.

Financial services and banking: Average around 22 weeks. These firms have structured policies and tend to follow them consistently.

Technology: Typically 2 to 4 weeks per year for non-executive roles, but practices vary wildly. Large tech companies (the ones Los Angeles employees increasingly work for, even remotely) tend to offer more generous packages than startups. Some include accelerated vesting of equity as part of the deal.

Entertainment and media: Varies significantly. Studio employees in LA often have shorter tenure due to project-based work, which compresses the weeks-per-year calculation. But above-the-line and executive roles frequently negotiate severance terms upfront.

Manufacturing and industrial: 1 to 1.5 weeks per year. On the lower end, but packages are usually straightforward cash with COBRA continuation.

Healthcare: Similar to manufacturing at 1 to 1.5 weeks per year for non-clinical staff. Physician and executive contracts are negotiated separately.

What the Cash Number Doesn't Tell You

The dollar figure on your severance offer is only part of the picture. To calculate the real value, you need to account for what's included and what's missing.

Health insurance continuation. COBRA premiums in Los Angeles can run $600 to $800 per month for an individual and $1,500 to $2,500 for a family. If your employer agrees to pay their portion for six months, that's worth $3,600 to $15,000 on top of the cash severance. If they're not offering this, it's a negotiable item.

Equity and stock options. Unvested RSUs or stock options that disappear when you leave can be worth more than the cash severance itself. Some employers will agree to accelerate vesting for a portion of your unvested shares. This is especially relevant in LA's growing tech sector.

Outplacement services. Companies sometimes offer career coaching or job placement services. These are worth $3,000 to $10,000 at market rate, but only if you'll actually use them. If not, you can sometimes negotiate their value into the cash amount instead.

Bonus and commission payments. If you're owed a pro-rated bonus or earned commissions, those are separate from severance under California law. Labor Code Sections 201 through 203 require that earned wages, including commissions, be paid at termination regardless of whether you sign a severance agreement. Make sure your offer doesn't try to roll owed compensation into the severance number.

The Tax Hit You Need to Calculate

Severance pay is taxable income. The IRS treats severance as supplemental wages, which means your employer will likely withhold at the flat 22% federal supplemental rate. Add California state income tax (which can be 9.3% to 13.3% depending on your bracket), Social Security (6.2% up to the wage base), and Medicare (1.45%), and you could lose 35% to 40% of the gross amount to taxes.

A $50,000 severance offer might net you $30,000 to $32,500 after withholding. That changes the math on whether the offer is adequate, especially if you're comparing it to several months of living expenses in Los Angeles.

How the severance is structured matters too. A lump sum payment means a single large tax event but gives you faster access to EDD unemployment benefits. Salary continuation spreads the tax burden but may delay your unemployment eligibility. An employment attorney who reviews severance agreements can help you evaluate which structure is better for your specific situation.

How to Use These Benchmarks

Take your offer and stack it against the ranges above. If you're a mid-level employee with eight years of tenure being offered four weeks of pay with no benefits continuation, that's below market by any measure. If you're a director with five years of tenure being offered 12 weeks plus six months of COBRA, you're in the competitive range, though there may still be room to negotiate.

The benchmarks give you the starting point. But what ultimately determines your leverage is the legal claims you'd be giving up by signing. A severance agreement is a contract where you trade your right to sue for a payment. If the claims you're releasing are worth more than the payment being offered, the deal isn't good enough. That's true even if the cash number looks reasonable compared to industry averages.

Get a Professional Valuation

Our employment attorneys in Los Angeles evaluate severance packages every day. We can tell you whether your offer is competitive, what claims you'd be releasing, and whether the total package matches what employers in your industry actually pay. The consultation is free, and if we can't negotiate a better deal, you don't pay us.

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