Dispelling Severance Pay Myths
There are a lot of myths, misconceptions, and misinformation when it comes to your employment entitlements. There is no greater area of confusion then in the calculation of severance pay when an individual is terminated. As an employment lawyer there are many formulas both employees and employers state should be used when calculating severance pay – one week per year, one month per year and so on.
This is complete nonsense. There is no mathematical formula which dictates severance pay when an individual is dismissed from their employment. Instead, there are a number of factors when considered together, determine what an individual is owed.
Length of Employment
The most commonly cited and misunderstood factor is the length of service an individual has with an employer. Many individuals believe that only those employees with many years of service are owed significantly greater severance packages. This is completely incorrect. In many cases employees with the shortest service time are provided with comparably higher severance payments.
For example, an employee who is 60 years old, with 30 years of service would be entitled to as much as 24 months’ severance. Whereas that same employee with only 2 years of service would be entitled to as much as 8 months’ severance pay. For that reason it is very important for all employees to determinate exactly what they are owed.
Typically, older employees are entitled to greater amounts of severance pay. This accounts for the increased difficulties that older workers face when seeking re-employment. That certainly does not mean that a younger worker should not seek out a fair severance package. Too often I speak with young workers who were reluctant to call me due to their age.
While age is a factor, it is only one consideration of many which can impact the amount of severance you are owed. Every day my firm assists young workers in negotiating significantly increased severance. It is always important to determine what you are owed when dismissed regardless of age or any other factor.
Traditionally, senior employees or those employees with specialized skills have been provided with greater amounts of severance. While that is still true in many respects, the playing field has begun to level out in recent years. More and more, severance pay is being increased as a result of the difficultly an individual has in replacing employment and not based only on the position they held with their former employer. As a result it is more important now than ever to fully assess exactly what you are owed when dismissed.
In The News:
Former Farm restaurant employees outraged as Janice Beaton claims insolvency then opens new eatery
Calgary sees record number of business, using money from severance packages to launch new ventures
Severance payments criticized as Ontario puts ORPP spending at $70M
Availability of Employment
In today’s increasingly challenging and competitive employment market it is taking individuals longer periods of time to secure employment after they are dismissed. This is one of the most important factors in determining the amount of severance pay owed and applies to individuals of all ages, who are both short and long service employees.
An employee working in a declining industry, such as manufacturing, will not be able to replace their position as quickly as the average person. As the purpose of severance pay is to compensate you for the time you are out of a job, this is absolutely a factor an employer must consider in determining what you are owed.
Other Important Considerations for Severance Pay
Other factors which will increase the severance pay you are owed:
- Whether you were recruited or induced to accept employment with the employer who has terminated you.
- Whether you are subject to a non-competition or non-solicitation clause that limits your future prospects.
- Whether you are pregnant, ill, or suffer from a medical condition which would make it difficult for you to find work.
- Whether your employer has terminated you for cause which will make it difficult for you to find new employment.
In any situation when you are dismissed, I encourage you to call me right away and have the situation fully assessed. Severance pay must take into account all factors including your personal and employment circumstances. For that reason, I encourage everyone, not just dismissed employees, to visit the severance pay calculator (www.SeverancePayCalculator.com) and find out exactly what you are owed if you lose your job. It is free, anonymous, accurate, and best of all simple to use.Senior employees or employees with specialized skills are provided with greater amounts of severance. Click To Tweet
Stephen Gillman is an associate lawyer with Samfiru Tumarkin’s Labour and Employment Law Practice Group in Toronto, Ontario.