If you have just been fired from your job in Ontario, your employer will likely offer you a lump sum of money and ask you to sign a release. They may call it termination pay, or they may call it pay in lieu of notice. In Ontario employment law, these two terms mean the exact same thing.
While your employer might claim they are giving you a “generous” termination payout, they are often only offering the bare minimum required by the government.
The Quick Answer: Termination pay (or pay in lieu of notice) is the money your employer legally owes you when they fire you without cause and want you to leave immediately. While the Employment Standards Act (ESA) caps this pay at just 8 weeks, Ontario common law frequently entitles employees to up to 24 months of full pay.
On This Page:
- 1. What is Termination Pay?
- 2. How to Calculate ESA Termination Pay
- 3. Common Law Difference
- 4. Termination Pay vs. Severance Pay
- 5. Vacation Pay & Bonus
- 6. Get Legal Advice
- 7. FAQ
What is Termination Pay in Ontario?
In Ontario, an employer can fire a non-unionized employee at almost any time, for almost any reason, provided it is not discriminatory. However, they must provide the employee with reasonable advance warning that their job is ending.
When an employer decides to let you go, they have two ways to provide this warning:
- Working Notice: You are told your job is ending on a specific future date, but you must keep coming to work and performing your duties until then.
- Pay in Lieu of Notice (Termination Pay): Your employer asks you to leave immediately. Because they did not give you advance warning, they must cut you a check for the exact amount of wages and benefits you would have earned if they had given you working notice.
How to Calculate ESA Termination Pay
If you are a provincially regulated employee in Ontario, the absolute minimum amount of termination pay you are owed is dictated by the Employment Standards Act (ESA).
The ESA calculates termination pay based strictly on your years of continuous service with the company. It maxes out at 8 weeks of pay.
Ontario ESA Minimum Notice Chart
| Length of Continuous Employment | Minimum ESA Termination Pay Owed |
|---|---|
| Less than 3 months | None (Probationary Period) |
| 3 months but less than 1 year | 1 week of pay |
| 1 year but less than 3 years | 2 weeks of pay |
| 3 years to 8 years | 1 week of pay per year of service |
| More than 8 years | 8 weeks of pay (Maximum) |
The Common Law Difference: Getting What You Deserve
Here is the secret most employers do not want you to know: the ESA minimums are almost never your true legal entitlement.
Unless you signed an employment contract containing a perfectly drafted, legally binding termination clause, your rights automatically default to Ontario Common Law Severance.
Under common law, judges calculate your pay in lieu of notice using the Bardal Factors. Instead of just looking at how long you worked there, the courts also consider your age, your job title, and how difficult it will be for you to find a similar job in the current economy.
Under common law, your termination pay can equal up to 24 months of full compensation. If your employer only offers you the ESA minimum, they are wrongfully dismissing you.
Termination Pay vs. Severance Pay
While people often use the terms interchangeably in casual conversation, “termination pay” and “severance pay” are two distinctly different legal concepts under the Ontario ESA.
- Termination Pay is given to almost every employee to replace the advance notice they should have received before being fired.
- Severance Pay is an additional payment reserved only for long-term employees (5+ years of service) who work for large companies (a global payroll of $2.5 million or more).
Together, these two distinct payments form the foundation of your overall severance package.
Does Termination Pay Include Vacation Pay and Bonuses?
Yes. Because pay in lieu of notice is designed to put you in the exact same financial position you would have been in if you had worked your notice period, your employer can’t just pay your base salary.
Your termination pay must legally include:
- Your regular wages or salary.
- Any commissions you would have earned.
- Continuation of your health, dental, and life insurance benefits.
- Pension matching or RRSP contributions.
- Accrued vacation pay.
- Your bonus (if it was a regular, expected part of your compensation, even if the payout date falls after you were fired).
Put Samfiru Tumarkin LLP in Your Corner
Have you been fired and handed a termination letter, do not sign it or contact the Ministry of Labour. Once you sign a release, you forfeit your right to pursue your employer for thousands of dollars in common law pay you may be owed.
The Ontario employment lawyers at Samfiru Tumarkin LLP have the experience to review your offer, understand what your rights are, and negotiate the maximum pay in lieu of notice available under the law.
Whether you need a Toronto severance lawyer or representation anywhere in Ontario, we are here to help.
Frequently Asked Questions
Do I get termination pay if I am fired for cause?
Generally, no. If you are terminated for “just cause” (such as theft, violence, or severe insubordination), you forfeit your right to both termination pay and severance pay. However, employers frequently allege “cause” for minor performance issues to avoid paying you. If you were fired for cause in Ontario, contact an employment lawyer immediately — most “cause” terminations do not hold up in court.
Is termination pay taxable in Ontario?
Yes. Whether you receive it as a lump sum or as salary continuance, termination pay is considered taxable income by the Canada Revenue Agency (CRA) and is subject to statutory deductions.
Can my employer withhold my final paycheck if they pay me termination pay?
No. Your employer must pay all of your outstanding wages, accrued vacation pay, and your statutory termination pay no later than your next regular payday, or 7 days after your employment ends — whichever is later.