Understanding Termination Pay vs. Severance Pay in Ontario

When employment ends in Ontario, employees may be entitled to different types of compensation: termination pay and severance pay. Although these terms are often used interchangeably, they serve distinct purposes and have different eligibility requirements. Here’s what you need to know to understand the difference.

For a detailed look at each type of compensation, see our dedicated pages on termination pay in Ontario and severance pay in Ontario.

Is Severance Pay the Same as Termination Pay?

No, termination pay and severance pay are not the same. Both can be part of what’s commonly referred to as a “severance package,” but they each have unique criteria and serve separate purposes under Ontario’s Employment Standards Act (ESA).

Termination pay is meant to cover the notice period when you’re let go without warning, while severance pay compensates for loyalty and years of service. Essentially, termination pay replaces notice, whereas severance pay is recognition for long-term commitment.

• Example: An employee with over 3 months of service is generally entitled to termination pay or working notice if their employment is ended without cause. Severance pay, however, applies to long-term employees (5+ years) if the employer meets certain financial or workforce criteria.

What is Termination Pay?

Termination pay is compensation provided when an employer ends an employment relationship without sufficient notice. Instead of providing a notice period, the employer pays out a lump sum equivalent to what the employee would have earned during that time.

• Eligibility: Employees with at least 3 months of continuous service are entitled to termination pay if no working notice is given.
• Calculation: Based on length of employment, up to 8 weeks under the ESA.

For more details, visit our Termination Pay Ontario page.

What is Severance Pay?

Severance pay compensates employees with five or more years of service, provided they meet certain criteria, such as working for a company with a $2.5 million payroll or experiencing a mass termination.

• Purpose: Recognizes the impact of job loss on long-term employees.
• Calculation: Typically one week per year of service, up to 26 weeks.
• Consideration: The amount of severance you can get may be limited by a termination clause in your employment contract.

For more in-depth information, including why your severance package could actually be as much as 24 months’ pay, see our Severance Pay Ontario page.

Am I Getting the Right Amount of Termination and Severance Pay?

Employers often provide only the ESA minimum, which may not cover your complete entitlements under common law. If your severance package falls short, it constitutes wrongful dismissal. Have an Ontario employment lawyer at Samfiru Tumarkin LLP review your package to ensure you’re receiving the full compensation you deserve. Contact us today to protect your rights and maximize your entitlements.

Why Choose Samfiru Tumarkin LLP for Your Severance Review

At Samfiru Tumarkin LLP, we have years of experience helping thousands of clients understand and secure the full extent of their termination and severance entitlements. If your employment has ended, our team can assess your package to confirm it meets Ontario’s legal standards and aligns with your unique situation.

Don’t sign any termination letter or severance offer until we review it! You may be entitled up to 24 months’ pay.