Bonus Pay in Ontario: What Employees Need to Know

In Ontario, some bonuses are guaranteed (non-discretionary) and written into your contract or tied to performance goals. Others are discretionary and depend on your employer’s choice. If you’re let go, you’re often still owed bonus pay as part of your severance package — unless your contract clearly says otherwise. And remember, bonuses are taxed the same way as your regular salary, with income tax, CPP, and EI deducted.

What is Bonus Pay in Ontario?

A bonus is extra money an employer pays on top of your salary. It can be:

• A set percentage of your pay (e.g. 10% annual bonus)
• Based on meeting performance goals or sales targets
• A one-time year-end or holiday bonus

In Ontario, a guaranteed (non-discretionary) bonus is treated as part of your wages. A discretionary bonus is one of your employer chooses to give out, often without a formula.

Discretionary vs. Non-Discretionary Bonus (What’s the Difference?)

• Non-discretionary (guaranteed) bonuses: Written into your contract or based on clear rules (like hitting sales goals). If you earn it, you’re entitled to it.
• Discretionary bonuses: Up to the employer’s choice. But if they’ve paid it consistently for years, it may create an expectation you can rely on.

Is a Bonus Part of Severance Pay in Ontario?

Yes — very often. If you’re terminated without cause or wrongfully dismissed in Ontario, your severance pacakge should usually include any bonus you would have earned during your notice or severance period.

Even if your contract says you must be “actively employed” on the payout date, Ontario courts have said that wording alone isn’t always enough to cut you out. If your bonus is a regular and expected part of your income, there’s a strong chance it’s part of your severance.

Am I Entitled to My Bonus If I Resign?

It depends:

• Already earned: If you earned the bonus before your last day, you may still be entitled to payment.
• Plan wording: If the plan says you must be employed on the payout date, that could block your claim — but only if the language is clear and enforceable.

Can I Sue My Employer for Not Paying My Bonus?

Yes. If your employer refuses to pay a bonus you’ve earned, you may have legal options. Common situations include:

• Guaranteed bonuses tied to targets, sales, or formulas
• Employers who regularly paid bonuses but suddenly withhold them
• Bonus payments missing from a severance package

Are Bonuses Taxed Differently in Ontario?

No. A bonus is treated just like your salary. Your employer will deduct:

• Income tax
• Canada Pension Plan (CPP) contributions
• Employment Insurance (EI) premiums

That’s why your bonus paycheque may look smaller than expected. The “bonus tax” isn’t a separate tax — it’s just regular source deductions.

Common Scenarios for Employees

Here’s how Ontario bonus rules play out in real life:

• Fired before bonus day: You may still get the bonus if it falls inside your severance period.
• On working notice: If you keep working until bonus time and meet the requirements, you should receive it.
• On maternity or parental leave: Guaranteed bonuses tied to performance may still be owed.
• After resigning: You might qualify if the bonus was already earned before your last day.

Quick FAQs

Key Takeaways for Employees

• Guaranteed bonuses are enforceable.
• Discretionary bonuses may still count if there’s a history of payment.
• Bonuses often form part of severance when you’re let go.
• Bonuses are taxed like salary — no separate “bonus tax.”
• Act quickly if a bonus isn’t paid; Ontario’s claim deadline is 2 years.

What to Do If Your Bonus is Withheld After You’re Fired

If you lose your job and your employer refuses to include your bonus pay in your severance package, don’t assume you aren’t entitled to it. In Ontario, bonuses are often a significant part of compensation and can add up to months of extra pay. Many employees are owed severance of up to 24 months, which can include both salary and bonus payments.

At Samfiru Tumarkin LLP, we have:

• 👥 Represented 50,000+ Canadians
• 💰 Secured millions in severance payouts
• ⚖️ Settled over 99% of cases out of court
• 📱 Free Termination Consultations — in many, but not all, cases
• ⭐ Earned 3,000+ 5-star Google reviews
• 🏆 Named on of Canada’s Best Law Firms

Call us at 1-855-821-5900 or request a consultation online.