Is My Severance Package Fair?

Most people sign within a week. Here's how to actually evaluate your offer before the clock runs out.

Getting laid off is disorienting. You're handed a document, told you have 21 days, and left to figure out whether the number in front of you is reasonable — usually without any frame of reference. Is eight weeks good? Is fourteen weeks what someone with your tenure should expect? The honest answer is: it depends on three things. Run your offer through each one before you decide anything.

This is the three-lens fairness test — formula, industry, and benefits. Miss any one of them and you're guessing.

Lens 1: The Formula — Does the Math Add Up?

Severance is almost always calculated as some combination of base salary and years of service. The formula your employer used tells you more than the headline number does.

The floor is one week of pay per year of service. If you've been at a company for six years and you're offered six weeks of base pay, you're at the legal and ethical minimum — not the middle of the market. That matters.

The competitive benchmark is two weeks per year, typically with a base component on top. Meta's publicly disclosed formula is 16 weeks plus two weeks per year of service, uncapped. Google's is 16 weeks plus two weeks. Those are the high end, but they establish what "genuinely competitive" looks like at scale.

Most companies now use hybrid formulas — a base amount (typically four to twelve weeks) plus a per-year multiplier. A five-year employee at a company using "eight weeks plus 1.5 weeks per year of service" would receive 15.5 weeks. That's solidly mid-market.

If your employer is using a flat amount — say, "eight weeks regardless of tenure" — that formula favors newer employees and penalizes longer-tenured ones. It's below market for anyone with more than four years of service. Flat formulas almost never serve the employee.

One more thing the formula should tell you: what counts as "pay." Base salary is standard. Whether it includes your target bonus in the calculation, or just base, is worth checking — especially if a significant portion of your total comp came through variable pay.

Lens 2: The Industry — Are You Comparing Against the Right Benchmark?

A ten-week severance in retail is generous. The same offer in finance is thin. Industry benchmarks vary enough that without this context, the formula comparison alone can mislead you.

The Challenger, Gray & Christmas 2025 Severance Benchmarking Report — covering more than 8,000 respondents across 840 companies using 2024 data — shows the spread:

One important caveat: these numbers likely skew high. Self-reported surveys over-index on people who received severance in the first place. Employees terminated for cause, hourly workers laid off without any package, and people who received only their final paycheck don't show up here. Treat the industry column as a reasonable ceiling, not a floor.

That said, if your offer sits materially below the benchmark for your sector, that gap is your negotiating argument — and it's a much stronger one than "I just feel like I deserve more."

Tenure and level adjust everything. The table above covers individual contributors. Managers typically receive 25–50% more than these benchmarks; directors and VPs receive more still; executives receive 2–4x. If you were a senior leader and your offer looks like an IC package, that's a meaningful red flag — not just a negotiation opportunity.

Lens 3: The Benefits — What Else Is Actually in This Package?

The headline cash number is only part of the story. A twelve-week offer with no benefits extension is worth materially less than a ten-week offer with six months of employer-paid health coverage. Benefits are where a lot of the hidden value — and hidden risk — lives.

Health coverage is the most consequential benefit to scrutinize in 2026. The ACA enhanced premium tax credits that made marketplace plans affordable from 2021 through 2025 expired on December 31, 2025 and were not renewed by Congress. Average premiums for subsidized enrollees roughly doubled. That shift changes the calculus significantly: employer-paid COBRA is once again the most cost-effective option for most laid-off employees, often by a wide margin.

This matters because of how health benefits get structured in severance. If your employer pays your COBRA premium directly to the insurer, that's non-taxable income to you. If they hand you cash in lieu of COBRA and let you handle it yourself, that cash is W-2 income — taxed at your marginal rate plus FICA, netting you roughly 55–70 cents on the dollar depending on your state. For a $2,000/month family premium, the difference between direct payment and cash is real money. Six months of employer-paid COBRA is now the benchmark; three months is below it.

Outplacement support ranges from nothing to $25,000 in executive-tier career coaching programs. If it's offered, make sure it's actually useful for your situation — a three-month subscription to a job search platform isn't the same as hands-on recruiter access.

Pro-rated bonus is worth asking about explicitly. If your employer's bonus cycle covered a period you worked, that pro-ration may be owed regardless of what the severance agreement says about it — but many employees don't ask, and many employers don't volunteer it.

Equity and unvested stock are the wildcard. The default treatment in almost every severance agreement is immediate forfeiture of anything unvested. Whether your employer accelerates any portion of that vesting — even to the next scheduled vest date — can be the single largest financial variable in the entire negotiation. We cover equity treatment in depth in a separate guide, but the short version: it's negotiable far more often than employees realize, and almost nobody asks.

A Quick Scorecard Before You Sign

Run through these six questions honestly:

1. Is my formula at least two weeks per year of service — or a competitive hybrid with a meaningful base?
2. Does my total weeks of pay meet the industry average for my sector and tenure?
3. Am I getting at least three months of health coverage, ideally paid directly by the employer?
4. Did the agreement address my unvested equity — even to confirm it's being forfeited?
5. Is there a pro-rated bonus conversation worth having?
6. Does the agreement give me a full 21 days to review (or 45 days if this was a group layoff)?

If you answered "no" or "I'm not sure" to two or more of these, you have negotiation headroom. Not every employer will move — but most will move on something, and knowing where you stand makes that conversation possible.

What Happens If You Just Sign?

Nothing catastrophic, necessarily. Many severance packages are fair on all three lenses. But the asymmetry is important: the cost of spending 30 minutes evaluating your offer is zero. The cost of signing a below-market package is that you've accepted less than you were owed.

The 21-day window exists because Congress recognized, when passing the ADEA, that employees under financial and emotional stress make worse decisions. That window is there for a reason — use it.