When people picture "severance," they usually picture a single number -- so many weeks of pay, done. In practice, a real severance letter is often a small itemized statement: a base severance amount calculated from years of service, a separate payout for unused vacation or PTO, occasionally a pro-rated share of an annual bonus, and sometimes pay in lieu of a notice period the company doesn't want you to work out. Each of those has a different basis and, in some cases, a different legal status. This guide walks through how to identify each piece and add up what a package is actually worth -- and how to think about that total against your own monthly budget.
The pieces a real severance letter can contain
- Base severance: usually years of service × a weeks-per-year rate, following whatever informal norm or written company policy applies -- this is the figure most severance calculators, including this site's, focus on.
- PTO / vacation payout: a separate cash-out of accrued, unused paid time off. In some states this payout is legally required at termination regardless of severance; in others it depends entirely on company policy, so check your state's rules and your employee handbook.
- Pro-rated bonus: a partial share of an annual or quarterly bonus based on months already worked in the current period. Whether it's included depends on the bonus plan document -- many plans require active employment on the payout date and simply exclude anyone who's already left, severance or not.
- Pay in lieu of notice: a payment covering a notice period the employer chooses not to have you work through. It's conceptually tied to the notice period rather than to tenure, and it's sometimes required by company policy, contract, or (for certain large layoffs) WARN Act back-pay rules if proper notice wasn't given.
A worked example: adding up a mixed package
Here's a hypothetical, illustrative walkthrough -- not a real case, and not a prediction for your own situation. Say an employee earns $1,200/week, has 6 years of service, has accrued 3 unused weeks of PTO, is due a bonus that's typically about 2 weeks of pay when pro-rated for months worked this year, and the employer is paying out a 2-week notice period instead of having them work it.
| Component | Basis | Amount |
|---|---|---|
| Base severance | 6 yrs × 1 wk/yr | $7,200 |
| PTO payout | 3 weeks unused | $3,600 |
| Pro-rated bonus | ≈2 weeks equivalent | $2,400 |
| Pay in lieu of notice | 2-week notice period | $2,400 |
| Gross package total | 13 weeks equivalent | $15,600 |
Two things stand out in an example like this. First, the base severance line alone ($7,200) looks like a modest 1-week-per-year package, but the full letter totals more than double that once PTO, bonus, and notice pay are added in -- a very different picture than the headline number suggests. Second, because these four components have different legal bases, it's worth asking your employer (or HR contact) to confirm each line separately rather than assuming a verbal "12 weeks of severance" figure already includes your PTO and bonus.
A calculator built strictly around years-of-service × weeks-per-year -- like the base-severance estimate on this site's severance pay calculator -- is intentionally scoped to that one component, since PTO balances, bonus plans, and notice arrangements vary too much between employers to model generically. Treat it as your starting line, then add your own package's specific PTO, bonus, and notice figures on top by hand, the same way the table above does.
Turning the total into a runway: how many months does it cover?
Using the example above: a $15,600 gross package, after a rough estimate of taxes (the IRS commonly withholds a flat 22% federal supplemental-wage rate on severance, plus FICA and any state tax), might net out to somewhere in the neighborhood of $11,000–$12,000 -- purely illustrative, since actual withholding depends on your total income, state, and W-4 elections. If that hypothetical household's realistic monthly expenses run $3,500, the package works out to roughly 3 to 3.5 months of runway. That's a very different framing than "13 weeks of pay," and arguably a more actionable one when you're deciding how quickly you need to line up the next job or whether to negotiate for more time.
There's no universally "right" number of months a package should cover -- it depends on your industry, seniority, local job market, and personal risk tolerance. But running your own numbers through this net-severance-over-monthly-expenses lens, alongside the standard weeks-per-year comparison, gives you a second, complementary way to judge whether an offer feels adequate for your circumstances. A future update to this site's calculator may add an optional runway field directly to the results, alongside optional rows for PTO payout, bonus, and notice pay-in-lieu -- for now, the math above is straightforward enough to do with a pad of paper or a spreadsheet.