These calculators are provided for estimates only. Calculations will not affect SurePayroll account information. You must enter payroll data directly into your SurePayroll account to process it for an upcoming payroll period. Log into your account here or by clicking Log In at the top of the page. Please direct specific SurePayroll questions to Customer Care after logging in.
Information and interactive calculators are made available to you only as self-help tools for your independent use and are not intended to provide legal, investment or tax advice. We cannot and do not guarantee their applicability or accuracy in regard to your individual circumstances. All examples are hypothetical and are for illustrative purposes. We encourage you to seek personalized advice from qualified professionals regarding all personal finance issues.
What is severance pay?
Severance is pay provided when employment ends, beyond wages the employee has already earned. The federal Fair Labor Standards Act (FLSA) doesn’t require severance pay, although an agreement, policy, other commitment or applicable state law may require it in a particular situation.
If you’re deciding whether to offer severance or how to set the gross amount, see Is Severance Pay Required for Small Businesses? What Employers Should Know. Once you know the gross severance payment, you can use this calculator to estimate payroll withholding and take-home pay.
How to use the severance pay calculator
Use the calculator to estimate payroll withholding and take-home pay on a severance payment. You’ll need the gross severance amount and the employee’s current federal, state and payroll information.
1. Enter the gross severance payment
Enter the gross severance amount in Gross Pay. For a one-time severance payment, select Pay Per Period as the Gross Pay Method.
2. Add the employee’s current payroll information
Enter the employee’s Gross Pay YTD and select the employee’s regular Pay Frequency.
If the payment is exempt from federal income tax withholding, Social Security or Medicare, select the applicable option. Otherwise, leave those fields set to No.
3. Complete the federal withholding information
Enter the federal tax information requested by the calculator, including the employee’s W-4 version and filing status. Add any other requested federal withholding information that applies.
Use the employee’s current Form W-4 information rather than estimating filing or withholding selections.
4. Complete the state and local information
Enter the requested state withholding information. The fields displayed will depend on the state and may include filing status, allowances, additional withholding or state-specific payroll taxes.
Complete any local tax fields that appear for the employee’s location.
5. Add voluntary deductions, if applicable
Add any voluntary deductions that apply to the payment. The calculator provides options for 401(k), HSA and custom deductions.
Only include a deduction if it applies to the severance payment.
6. Calculate and review the estimate
Select Calculate Payroll to see the Payroll Estimation based on the information you entered.
The result is an estimate only. Using the calculator does not change information in your SurePayroll account or create a payroll run.
How taxes affect a severance payment
Cash severance is generally treated as wages for federal employment-tax purposes. Federal income tax withholding and Social Security and Medicare taxes can reduce the employee’s take-home payment. State or local taxes may also apply.
The severance pay calculator uses the payment, withholding and deduction information you enter to estimate payroll deductions and take-home pay. The result estimates withholding on the payment. It does not determine the employee’s final income-tax liability.
Need help with payroll?
SurePayroll® By Paychex helps small business owners calculate payroll taxes and process employee pay, including off-cycle payroll when you need to make a payment outside the regular payroll schedule.
Explore SurePayroll plans and pricing to find the right payroll option for your business.
Let's answer some of your questions
How do I calculate severance pay?
There is no federal formula for setting a severance amount. You may use a tenure-based amount, a flat amount or another method that fits your policy and circumstances. Once you determine the gross severance payment, enter that amount in the calculator to estimate withholding and take-home pay.
How is severance pay taxed?
Severance payments are wages subject to federal income tax withholding and Social Security and Medicare taxes. State and local taxes may also apply. This calculator estimates withholding and take-home pay based on the information you enter.
Does severance affect unemployment benefits?
Severance can affect unemployment benefits differently depending on the state. The employee’s state unemployment agency determines how the payment affects benefits.
Is severance pay required?
The FLSA doesn’t require severance pay. However, an agreement, policy, other commitment or applicable state law may create a severance obligation in a particular situation.
