Severance Pay Ontario: Your Complete Guide to Maximum Compensation

Losing your job is one of the most stressful and overwhelming experiences you can face. If you have just been let go in Ontario, your employer will likely hand you a severance package, tell you it is a “standard” offer, and pressure you to sign it quickly.

Do not sign it.

In Ontario, severance pay is the financial compensation provided to non-unionized employees who are fired, laid off, or let go without cause. While employers often offer the bare minimum required by the provincial government, the reality is that most employees in Ontario are legally entitled to tens of thousands of dollars more under common law — sometimes up to 24 months of full pay.

On This Page:

• 1. Severance Minimum vs. Maximum
• 2. How is Common Law Severance Calculated?
• 3. Who is Entitled to Severance Pay?
• 4. How Severance is Paid
• 5. Negotiate Your Severance Package
• 6. Get Legal Advice

The Three Layers of Severance: ESA Minimums vs. Common Law Maximums

The biggest mistake Ontario employees make is confusing government minimums with their actual legal rights. To truly understand what you are owed, you need to understand the “Three Layers” of compensation in Ontario.

When a company terminates an employee without cause, different legal frameworks apply.

Layer 1: ESA Termination Pay (The Baseline)

Under the Ontario Employment Standards Act (ESA), almost every employee who has worked for a company for at least three months is entitled to “notice of termination.” When an employer wants you to leave immediately rather than work through that notice period, they must give you Termination Pay (also known as pay in lieu of notice).

• The Limit: The ESA caps termination pay at just 1 week of pay per year of service, up to a maximum of 8 weeks.

Layer 2: ESA Severance Pay (The Additional Minimum)

“Severance Pay” under the ESA is a completely separate entitlement from Termination Pay. It is an additional payment, but it only applies if you meet strict criteria:

• You must have worked for the employer for at least 5 years.
• The employer must have a global payroll of at least $2.5 million (or be engaged in a mass layoff of 50+ employees).
• The Limit: If you qualify, ESA Severance Pay provides 1 week of pay per year of service, capped at 26 weeks.

(Combined, the absolute maximum an employer is forced to pay under the government ESA rules is 34 weeks).

Layer 3: Common Law Severance (The Maximum)

This is where your true entitlements lie, and what employers desperately hope you don’t know about. Ontario courts recognize that it takes time to find a comparable new job. Under common law, your severance package is based on “reasonable notice,” which factors in your entire compensation package (salary, bonuses, benefits, stock options).

• The Limit: Common law severance has no strict statutory cap, and routinely provides employees with up to 24 months of pay.

How is Common Law Severance Calculated in Ontario?

There is no simple “one week per year of service” rule when calculating full common law severance. Instead, Ontario courts apply a set of legal principles known as the Bardal factors (named after a landmark 1960 Supreme Court case) to determine exactly how much you are owed.

The core factors a judge will look at include:

• Your Age: Older employees generally face a harder time finding new work, which significantly increases their severance entitlements. (Read more: Severance for Older Employees and Retirement)
• Length of Service: The longer you have dedicated yourself to a company, the more severance you are owed. A 20-year employee will receive vastly more than a 2-year employee.
• Position, Salary, and Seniority: Specialized roles, management positions, and C-Suite executives typically receive larger notice periods because equivalent jobs are scarcer.
• Availability of Similar Employment: If the job market in your industry is poor, or your specific skills are no longer in high demand, your severance should be higher to bridge the gap while you search for work.

It is also critical to know that your severance package must include your total compensation, not just your base salary. This means bonuses, commission, pension contributions, car allowances, and extended health benefits must all be continued or paid out for the duration of your notice period.

Who is Entitled to Severance Pay in Ontario?

Almost all non-unionized workers in Ontario are entitled to a severance package if they are let go. This includes:

• Salaried Professionals and Managers
• Hourly Employees
• Full-Time and Part-Time Staff
• Independent Contractors: Many workers who are told they are independent contractors in Ontario are actually legally classified as employees by the courts. If your employer controlled your schedule, provided your tools, and dictated your pay, you are likely an employee owed full severance.

Do I get severance if I quit?

Generally, a voluntary resignation means you forfeit your right to severance pay. However, if your employer forced you to quit by cutting your pay, demoting you, changing your shifts drastically, or creating a toxic work environment, you can claim constructive dismissal Ontario. If successful, the law treats your resignation as a termination, and you are owed full severance. (Read more: Do I get severance if I quit?)

Do I get severance if I am fired for cause?

True “just cause” terminations (such as severe theft, violence, or extreme insubordination) eliminate your right to a severance package. However, employers frequently misapply “cause” for minor performance issues or minor mistakes just to avoid paying you. Most for-cause terminations do not hold up in an Ontario court. If this happens to you, you have likely been wrongfully dismissed and should contact our lawyers immediately.

How Severance is Paid: Lump Sum vs. Salary Continuance

When negotiating your package, the structure of the payout is just as important as the final dollar amount. Employers typically offer one of two payout methods:

• Lump Sum: A one-time, upfront payment of your entire severance package. This gives you immediate financial security and a clean break from the company, but it may push you into a higher tax bracket for the year.
• Salary Continuance: Your employer keeps you on the payroll for a set number of weeks or months. While this keeps your benefits active, it almost always includes a “mitigation clause”—meaning if you find a new job before the continuance period ends, the payments from your old employer will stop.

Taxes and Employment Insurance (EI)

Severance pay is considered taxable income by the Canada Revenue Agency (CRA). Furthermore, receiving a severance package will delay your ability to collect Employment Insurance (EI). Structuring your package correctly (such as routing funds directly into an RRSP as a retiring allowance) can save you thousands of dollars in taxes.

How to Negotiate Your Severance Package

Employers have highly paid legal teams protecting their bottom line; you need someone protecting yours. Negotiating a severance package on your own is highly risky, especially if your employment contract contains a termination clause that attempts to limit you to ESA minimums.

If your severance offer falls short of your full common law entitlements, the employment lawyers at Samfiru Tumarkin LLP can step in.

1. We Assess the Offer: We calculate exactly what you are owed based on the Bardal factors.
2. We Review Your Contract: We look for illegal or unenforceable termination clauses that employers rely on to lowball you.
3. We Take Over: We handle all communications with your employer and their legal team.

Over 99% of our employment cases are resolved quickly and successfully through negotiation and mediation, without you ever having to step foot inside a courtroom.

Why Choose Samfiru Tumarkin LLP?

Samfiru Tumarkin LLP is the largest employee-side employment law firm in Canada. Our highly experienced Ontario employment lawyers — offering severance pay services in Toronto, Ottawa, and Hamilton — have helped tens of thousands of individuals secure the compensation they deserve during the most difficult times in their careers.

• 💰 Millions Recovered: We routinely turn minimum ESA offers into maximum common law payouts.
• ⚖️ No Win, No Fee: In many cases, you don’t pay us a dime unless we successfully secure a settlement for you.*
• ⭐ Highest Rated: With over 3,000 5-star Google reviews across Ontario, our results speak for themselves.

*Conditions apply. Not all cases qualify.

Get What You Are Owed Today

Don’t let your employer dictate your financial future. Contact Canada’s most positively reviewed employment law firm today.