Article

How Much Severance Should Companies Pay?

October 23, 2026

Two colleagues shaking hands

 

Most US companies pay about 3 to 6 weeks of severance, depending on the employee’s level and the formula they use. That’s according to LHH’s 2027 Severance and Separation Benefits Benchmark Study of 600 US leaders. CEOs average 5.4 to 6.3 weeks, and non-exempt employees average 3.0 to 4.2 weeks. Maximums reach 24.2 weeks for CEOs.

Is severance getting less generous?

Yes. Nearly every company still pays severance: 92% of organizations do, whether or not they have a formal policy. What has changed is how much they give, and to whom.

In 2024, organizations were making severance more generous. Three years later, 38% have made it less generous, up from 9%. At the same time, 69% expect layoffs or reductions in force in the next 12 months.

That’s almost double the 36% in 2024.

Workforce reductions are sometimes the only way to protect or grow a business. How you carry them out shapes your employer brand, your legal risk, and the trust of the people who stay. Severance sits at the center of that experience.

LHH surveyed 600 US leaders for its tenth Severance and Separation Benefits Benchmark Study. Here’s what the data says about how much companies pay today.

Key findings at a glance

  • Severance is less generous. According to LHH’s 2027 study, 38% of organizations cut back on severance in the last two years, up from 9% in 2024. Only 56% made it more generous, down from 76%.
  • Eligibility is more even across levels. 70% of organizations offer severance to CEOs, down from 91%. Eligibility for non-exempt employees rose from 45% to 51%.
  • Formulas are more personal. 40% base severance on age, length of service, level, and ability to find new work, up from 22%.
  • Health coverage is shrinking. Only 12% continue medical benefits for the full severance period, down from 52%.
  • Finance has a bigger say. CFOs and procurement now lead outplacement decisions at 31% of organizations, up from 8%.

Who is eligible for severance?

The gap between the top and the frontline has narrowed sharply. According to LHH’s 2027 study, CEO eligibility outpaced non-exempt eligibility by 46 points in 2024. Today the gap is 19 points.

  • CEO: 70% (down from 91%)
  • Senior management: 70% (down from 91%)
  • Directors: 71% (down from 92%)
  • Managers: 66% (down from 88%)
  • Supervisors: 67% (down from 80%)
  • Professional/technical: 67% (down from 74%)
  • Exempt: 54% (no change)
  • Non-exempt: 51% (up from 45%)

How do companies calculate severance?

Companies now tailor severance to each person’s situation more than they did before. Flat formulas that treat every employee the same have nearly disappeared.

  • Age, service, level, and ability to find new work: 40% (up from 22%)
  • Position level and years of service: 28% (down from 39%)
  • Flat weeks by position level: 23% (up from 21%)
  • No set formula: 8% (up from 3%)
  • Flat weeks for all employees: 1% (down from 9%)
  • Flat weeks per year of service for all employees: 1% (down from 6%)

82% also use a graduated scale that adds weeks after employees reach service milestones.

How many weeks of severance do companies pay?

Senior roles still get more severance than frontline roles. According to LHH’s 2027 study, the average depends on the formula a company uses.

Level

Flat weeks by level

Level and years of service

CEO

6.3

5.4

Senior management

5.7

4.7

Directors

5.7

5.0

Managers

5.1

4.6

Supervisors

4.8

4.3

Professional/technical

5.5

4.3

Exempt

4.8

3.9

Non-exempt

4.2

3.0

Average weeks among organizations using each formula. The 2027 survey reworded this question, so these figures don’t compare directly with past editions.

Minimums and maximums. 52% of organizations set a minimum severance amount, and 29% set a maximum. Minimums stay close across levels, from 4.0 weeks for non-exempt employees to 6.0 weeks for CEOs. Maximums vary much more, from 7.5 weeks for non-exempt employees to 24.2 weeks for CEOs.

How does your severance compare? Use the LHH severance calculator to benchmark your policy against peers.

How does severance differ by industry?

Every industry treats severance as standard practice. According to LHH’s 2027 study, at least 83% of organizations in each industry pay it. The differences show up in how they’ve changed it and what they expect next.

  • Financial services and computers and software lead at 96% offering severance. Telecom sits lowest at 83%.
  • Telecom is the only industry where more organizations made severance less generous (54%) than more generous (45%).
  • Aerospace and defense leads all industries in layoff expectations, at 90%.
  • Medical products and pharma (78%) and retail (76%) also expect layoffs at above-average rates.

What benefits do companies offer beyond severance pay?

Severance pay is only one part of a separation package. Most organizations also use benefits, stay bonuses, and outplacement to support departing employees.

Medical coverage. 85% of organizations keep severed employees on their medical plan for some period. Most end coverage at the end of the quarter (43%) or the end of the month (37%) when termination takes effect. Only 12% extend it for the full severance period.

Other benefits. Many organizations keep paying for other benefits during the severance period:

  • Extended health: 41%
  • Life insurance: 40%
  • Employee assistance program: 35%
  • Dental: 35%
  • Disability coverage: 33%
  • Vision: 32%

Stay bonuses. 96% of organizations offer stay bonuses to keep employees in place until their jobs end. Organizations that pay a percentage of salary give an average of 15% to CEOs and 13% to non-exempt employees. 85% let employees who accept a stay bonus start outplacement before they leave.

Outplacement. Outplacement now reaches most of the workforce. According to LHH’s 2027 study, 85% of organizations offer it to exempt employees, up from 61%, and 79% offer it to non-exempt employees, up from 58%. Most programs last three to six months.

Why are severance practices changing?

Three forces are reshaping severance:

  • More people to support. With 69% of organizations expecting layoffs, separation budgets have to stretch across more departing employees.
  • Finance at the table. CFOs and procurement bring closer scrutiny to every separation dollar.
  • AI and restructuring. In 2026, AI became the most commonly cited reason for announced US job cuts. 80% of CEOs expect layoffs in the next year.

Organizations aren’t treating layoffs as their only option. 99% routinely consider alternatives before involuntary terminations. The most common are retirement incentives (42%), voluntary departure programs (40%), and temporary leave (38%).

How do you build a severance policy that holds up?

A clear, current severance policy protects your people and your business. Use these benchmarks to check yours:

  • Review it regularly. 61% of organizations reviewed their policy in the last two years. If yours is older, it may not reflect today’s market.
  • Write it down. 46% of organizations use a written plan document, and 43% use general written guidelines. 11% have nothing in writing.
  • Look past the paycheck. Health coverage, stay bonuses, and outplacement shape how departing employees experience a transition.
  • Plan for scale. If layoffs are likely, decide now how you’ll balance generosity at the top with support across the workforce.

Frequently asked questions

How many weeks of severance is typical?
According to LHH’s 2027 study, companies that use flat weeks by level pay CEOs 6.3 weeks and non-exempt employees 4.2 weeks on average. Companies that also count years of service pay CEOs 5.4 weeks and non-exempt employees 3.0 weeks.

Is severance becoming less generous?
Yes. 38% of US organizations made severance less generous in the last two years, up from 9% in 2024, according to LHH’s 2027 study.

How do most companies calculate severance?
The most common formula, used by 40% of organizations, weighs age, length of service, level, and ability to find new work. 28% use position level and years of service.

Do companies keep paying health insurance during severance?
85% of organizations keep severed employees on their medical plan for some period. Most end coverage at the end of the month or quarter of termination. Only 12% extend it for the full severance period.

Who is eligible for severance?
70% of organizations offer severance to CEOs and 51% to non-exempt employees, according to LHH’s 2027 study. The gap between the top and frontline levels narrowed from 46 points in 2024 to 19 points.

Benchmark your severance policy

See how your severance stacks up by industry, company size, organization type, region, and role. Try the LHH severance calculator