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Severance Pay vs. Termination Pay

Under the Employment Standards Act in Ontario, provisions are made for both severance pay and termination pay, two (2) concepts that many individuals are confused by.

With respect to termination pay, an employee terminated without cause, is entitled to one-week of termination pay per year worked up to a maximum of 8-weeks termination pay.  This represents your base minimum entitlements under the legislation and does not represent your full severance package entitlement as determined by the common law.

Severance pay refers to an additional sum payable to terminated employees if they have accumulated over 5 years of service on the job and their employer has a payroll of over $2.5M. To calculate the amount of severance pay you are eligible for, multiply your regular wages for a regular work week by the sum of:

  • the number of completed years of employment;
  • the number of completed months of employment divided by 12 for a year that is not completed.

Your maximum severance entitlement under the Employment Standards Act is 26-weeks.  If your employer has failed to provide the base minimum termination pay and severance pay to you in your severance package, then the payout is illegal and would not be enforced by a Court. It is always advisable to consult with an experienced employment lawyer to review your severance package and determine if you have been offered all of your entitlements, including statutory termination and severance pay.

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