A layoff notice from Etsy starts five time-sensitive clocks that most employees don't know are running. On August 5, 2026, Etsy announced it's cutting 220 employees, approximately 12% of its total workforce, as part of a restructuring aimed at repositioning the business. Specific roles and departments weren't disclosed. If you received a notice, here's what you need to do, in the order the deadlines arrive.

The most urgent actions:
  • File for New York unemployment today, benefits don't start before your filing date.
  • Don't sign your severance agreement yet, you have 45 days to review it (group layoff, OWBPA).
  • Start your COBRA clock, you have 60 days to elect coverage, but premiums average $703/month.
  • Check your equity grant documents, ISOs must be exercised within 90 days of termination.
  • Note the Q3 estimated tax deadline: September 15, 2026, if your severance withholding falls short.

What happened

Etsy announced the layoffs on August 5, 2026. The company said it's cutting approximately 12% of its workforce, 220 people, to streamline operations and reposition for growth. Specific teams and roles weren't named in public reporting. Severance terms haven't been disclosed publicly.

File for unemployment today

Unemployment insurance is money you've already earned the right to receive. Filing is the first thing to do, ideally on your last day or the morning after.

In New York, you file through the state Department of Labor at dol.ny.gov. The maximum weekly benefit in New York is $504.1 Your actual weekly benefit depends on your recent earnings history.

Here's why filing immediately matters: New York UI benefits are not retroactive. You can't claim benefits for weeks before you filed. Every day you wait is a day you potentially forfeit. There's also a one-week waiting period before benefits begin, so the sooner you file, the sooner that clock starts.

When you file, have your Social Security number, last employer's information, and your employment history for the past 18 months ready. New York uses ID.me for identity verification, you'll need to complete that step before your claim processes. If you run into issues, call the NY DOL claims center rather than waiting for online resolution.

One thing people get wrong: accepting a severance package doesn't automatically disqualify you from UI in New York. It depends on how the severance is structured. File first and let the DOL make that determination.

What should you do about your severance agreement?

Read it carefully before you sign anything. That's the short version.

Because Etsy is cutting 220 employees at once, this is a group termination program under the Older Workers Benefit Protection Act (OWBPA). If you're 40 or older, you have 45 days to review the agreement before you have to decide.2 Even if you're under 40, don't feel pressured to sign quickly. Take the time you're given.

After you sign, you have 7 more days to change your mind and revoke the agreement.2 The 7-day revocation period is a legal right, HR cannot waive it, and the agreement isn't enforceable until those 7 days pass.

What to look for in the agreement: whether the release of claims is broad or narrow, whether it waives your right to file an EEOC charge (it can't, legally), whether there's a non-disparagement clause, and whether there's any non-compete language. If you have an employment attorney review it, have them look specifically at those four things. Many employment attorneys offer a flat-fee severance review.

Severance terms for this layoff haven't been publicly disclosed. Whatever you receive, compare it against what your offer letter and any equity agreements say about termination benefits. Those documents matter.

What should you do about health insurance?

You have two realistic options: COBRA continuation coverage or a Marketplace plan through the ACA. You have 60 days to decide on each.3

COBRA lets you keep your exact current Etsy health plan. The catch is cost. When you were employed, Etsy paid most of your premium. Under COBRA, you pay the full premium plus a 2% administrative fee. The average individual COBRA premium in 2026 is $703 per month.3 Family coverage runs higher. That's a real number, not an approximation.

The Marketplace alternative: losing employer coverage is a qualifying life event that triggers a 60-day Special Enrollment Period (SEP) on healthcare.gov.4 Depending on your income this year, you may qualify for subsidies that make a Marketplace plan significantly cheaper than COBRA. If your income drops substantially due to the layoff, run the numbers on healthcare.gov before defaulting to COBRA.

One important COBRA rule to know: you can elect COBRA retroactively within the 60-day window. That means if you go uninsured for a few weeks while you compare options and then have a medical event, you can elect COBRA and it covers back to the day your Etsy coverage ended. Don't let fear of a gap push you into a hasty decision. You have 60 days to choose.

See your post-layoff options on the free checklist.

What happens to your Etsy equity?

Etsy is a publicly traded company, so equity is likely part of your compensation. The rules depend on what type you hold.

If you hold Incentive Stock Options (ISOs): you have 90 days from your termination date to exercise them.5 After 90 days, any unexercised ISOs convert to Non-Qualified Stock Options (NQSOs). NQSOs are taxed as ordinary income at exercise, rather than getting the more favorable capital gains treatment ISOs can receive. That's a meaningful difference, especially for a larger grant.

There's an AMT consideration with ISOs worth flagging. If you exercise ISOs, the spread between the exercise price and the fair market value can trigger Alternative Minimum Tax, even if you don't sell the shares. For large grants, talk to a CPA before you exercise. This isn't something to figure out at tax time.

If you hold Restricted Stock Units (RSUs): unvested RSUs are generally forfeited on your last day. Check your grant agreement for any acceleration language tied to a separation event. Some agreements include partial acceleration; most don't.

For any equity questions, pull your grant agreements from Etsy's equity platform (likely Carta or Shareworks) before your system access is revoked. Download everything you can on your last day.

What about taxes on your severance?

Severance is taxed as ordinary income. The IRS classifies it as supplemental wages, which means your employer withholds at a flat 22% federal rate.6

Here's the problem with that: 22% is the supplemental withholding rate, not necessarily your marginal rate. If your total income this year puts you in a higher bracket, you'll owe the difference when you file in April. Don't spend the full severance assuming your tax bill is already covered.

Estimated taxes: Q2 2026 estimated payments were due June 15, 2026, that's already passed. Q3 is due September 15, 2026.7 If your combined withholding from Etsy and any other income sources isn't going to cover at least 90% of your 2026 tax liability, you may need to make a Q3 estimated payment. Use IRS Form 1040-ES to calculate what you owe.

New York also has state income tax on wages and severance. The NY Department of Tax and Finance is the right source for current state withholding rates, those apply on top of the federal rate.

What should you do with your 401(k)?

When you leave Etsy, you have a few options for your 401(k): leave it in the Etsy plan (usually allowed if the balance is above a minimum threshold), roll it into a new employer's plan, or roll it into an IRA.

Rolling into an IRA is often the most flexible option. You keep full control, you can choose your investments, and there's no dependence on a future employer's plan. A direct rollover, where the money transfers directly from Etsy's plan to your IRA, is the cleanest method. No taxes withheld, no risk of error.

If you take an indirect rollover, where Etsy cuts you a check, you have 60 days to deposit that money into an IRA or another qualified plan.8 Miss the 60-day window and the distribution is treated as taxable income for 2026, plus a 10% early withdrawal penalty if you're under 59 1/2. Etsy will also withhold 20% of the distribution upfront for taxes, and you'd have to make up that 20% out of pocket to roll over the full amount.

Direct rollover is simpler. Ask Etsy's plan administrator to do a trustee-to-trustee transfer directly to your IRA custodian.

You can also leave the money in Etsy's plan temporarily while you figure out your next steps. Just confirm with the plan administrator what the minimum balance threshold is for staying in the plan.

Deadlines and rules described here reflect federal law and general state guidelines as of the article date.

The Layoff Guide

The deadlines above apply whether or not you are tracking them. The Layoff Guide from Layoff HQ is a 33-page field guide that covers all twelve post-layoff deadline events in the order they arrive: unemployment, the severance review and revocation windows, COBRA and the Marketplace, your FSA, your equity window, your 401(k), and your taxes. Each event comes with timed checkpoints, the decision math, and the one mistake that costs people the most, plus a fill-in worksheet that turns your last day worked into your complete personal deadline calendar. One-time purchase. No subscription. Instant download, with a 14-day full refund if it is not useful.

Get The Layoff Guide, $39 or build your free Decision Calendar.

Written by the Layoff HQ research team. Sources verified against DOL, EEOC, IRS, and state workforce agency primary documentation.

  1. New York State Department of Labor. "File Your First Claim for Benefits." dol.ny.gov. Maximum weekly benefit: $504 (2026).
  2. U.S. Equal Employment Opportunity Commission. "Age Discrimination in Employment Act." eeoc.gov. OWBPA 45-day group review window; 7-day revocation right.
  3. U.S. Department of Labor, Employee Benefits Security Administration. "COBRA Continuation Coverage." dol.gov. 60-day election window. KFF Health Policy 101: average individual COBRA premium $703/month (2026).
  4. Healthcare.gov. "Special Enrollment Period." healthcare.gov. Loss of employer coverage triggers 60-day SEP.
  5. Internal Revenue Service. "About Publication 525." irs.gov. IRC Section 422: ISO 90-day post-termination exercise window.
  6. Internal Revenue Service. Publication 15 (Circular E). irs.gov/publications/p15. Supplemental wage withholding rate: 22%.
  7. Internal Revenue Service. "When to Pay Estimated Tax." irs.gov. Q3 2026 due date: September 15, 2026.
  8. Internal Revenue Service. "Rollover Chart." irs.gov. 60-day indirect rollover rule.