Understanding Termination Pay vs. Severance Pay in Ontario

When employment ends in Ontario, you may be owed far more than just a few weeks’ pay. Most employees are entitled to up to 24 months’ pay – but you need to understand the difference between termination pay and severance pay to know your full rights.

While these terms are often used interchangeably, they serve distinct purposes under Ontario law. And both are minimums under the Employment Standards Act (ESA) – your actual common law rights can be significantly higher.

For a deeper dive into each type of compensation in Ontario, visit our pages on termination pay and severance pay.

Want a quick overview about employment law legal terms? Watch the video below or check out the full episode in our TV section.

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 is money your employer owes you when your job is permanently ended. It’s meant to recognize your years of service and the impact of losing your job.

• Purpose: Compensates long-serving employees for the loss of employment.
• Calculation: Under the ESA, the minimum amount is typically one week per year of service, up to 26 weeks.
• Consideration: Your rights may be affected by a termination clause in your employment contract.

But that’s just the starting point. ESA severance is the legal minimum – it applies only in certain situations.

Under common law, which is separate from the ESA, almost every non-unionized employee in Ontario is entitled to significantly more. Common law severance is based on factors like your age, position, length of service, and ability to find new work. You don’t need to meet any special eligiblity rules (like payroll size, or size of the company’s layoff) to qualify for it.

The full amount can be up to 24 months’ pay – a difference that could be worth tens of thousands of dollars more than what your employer first offers.

For more information, see our Severance Pay Ontario page.

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 covers the notice period if you’re let go without warning.
• Severance pay compensates for long-term service and the financial impact of job loss.

Could You Be Owed More Than the ESA Minimum?

Employers often rely on ESA minimums, which cap termination pay at 8 weeks and severance pay at 26 weeks. But in most cases, the true amount owed under common law is up to 24 months’ pay. If you’ve received a severance package, it may be far below your legal entitlements.

Speak To an Employment Lawyer Today

At Samfiru Tumarkin LLP, our Ontario employment lawyers 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.

Many of our clients are shocked to learn they’re actually owed months’ worth of pay – up to 24 months in most cases. Before you sign, use the Severance Pay Calculator and speak to our team.

Don’t sign any termination letter or severance offer until we review it! Call Samfiru Tumarkin LLP today at 1-855-821-5900 or request a consultation online.