When you lose your job in Ontario, your employer might offer you “termination pay,” “severance pay,” “pay in lieu of notice,” or a “severance package.”These terms are often used interchangeably. But under Ontario employment law, they do not all mean the same thing.
Termination pay and severance pay are different legal entitlements under the Employment Standards Act — also known as the ESA. Many non-unionized employees may also be owed additional compensation under common law.
Before you sign a termination package or release, make sure you understand what your employer is offering — and whether it reflects your full legal rights.
Quick Answer
Termination pay is the minimum notice or pay in lieu of notice owed to most employees under Ontario’s ESA. It is generally capped at 8 weeks.
ESA severance pay is a separate payment for some long-service employees. It is generally capped at 26 weeks.
Many non-unionized employees may also be owed common law reasonable notice, often referred to as severance, which can be much higher than ESA minimums.
On This Page:
- 1. Termination Pay vs. Severance Pay Ontario
- 2. What is Termination Pay Ontario?
- 3. What is Severance Pay?
- 4. Can You Get Both?
- 5. Common Law Reasonable Notice
- 6. Common Misunderstandings
- 7. Termination Package Review
- 8. FAQs
Termination Pay vs. Severance Pay in Ontario
| Type of payment | Who may qualify | Maximum under the ESA | Key point |
|---|---|---|---|
| Termination pay | Most employees after at least 3 months of employment | Up to 8 weeks | Replaces working notice |
| ESA severance pay | Some employees with 5+ years of service | Up to 26 weeks | Separate from termination pay |
| Common law reasonable notice | Many non-unionized employees | Not capped by the ESA | Often much higher than ESA minimums |
What Is Termination Pay in Ontario?
Termination pay is the minimum amount an employer must provide when they end your employment without giving you enough working notice.
In Ontario, employers generally have when firing an employee without cause:
- Give the employee written working notice.
- End the employment immediately and provide termination pay instead.
Termination pay is sometimes called pay in lieu of notice. It is designed to replace the wages you would have earned if your employer had allowed you to keep working through the notice period.
For example, if your employer owes you four weeks of notice but wants you to leave immediately, they may have to provide four weeks of termination pay.
Who Gets Termination Pay in Ontario?
Most employees in Ontario are entitled to ESA termination pay if they have worked for their employer for at least three months and are fired without cause.
Termination pay can apply to:
- full-time employees
- part-time employees
- hourly employees
- salaried employees
- managers
- commissioned employees
How Much Termination Pay Do You Get in Ontario?
Under the Employment Standards Act (ESA), termination pay is based on length of service.
The ESA minimum is generally:
| Length of employment | ESA termination notice or pay |
| 3 months to less than 1 year | 1 week |
| 1 year to less than 3 years | 2 weeks |
| 3 years to less than 4 years | 3 weeks |
| 4 years to less than 5 years | 4 weeks |
| 5 years to less than 6 years | 5 weeks |
| 6 years to less than 7 years | 6 weeks |
| 7 years to less than 8 years | 7 weeks |
| 8 years or more | 8 weeks |
These are minimum standards only. Many non-unionized employees may be owed more under common law.
What Is Severance Pay in Ontario?
Severance pay under the ESA is different from termination pay.
ESA severance pay is an additional payment for certain long-service employees whose employment has been severed.
It is meant to recognize the employee’s service and the impact of losing their job.
Not every employee qualifies for ESA severance pay.
Who Gets ESA Severance Pay in Ontario?
To qualify for ESA severance pay, you generally must meet two main conditions:
- You have worked for your employer for at least five years.
- Your employer has a global payroll of at least $2.5 million, or the employer severed the employment of 50 or more employees in a six-month period because all or part of the business permanently closed.
If you do not meet these conditions, you may not qualify for ESA severance pay.
But that does not automatically mean you have no rights. You may still be owed termination pay and, if you are non-unionized, common law reasonable notice.
How Much ESA Severance Pay Do You Get?
ESA severance pay is generally calculated as one week of regular wages for each completed year of service, plus a prorated amount for completed months in a partial year.
ESA severance pay is capped at 26 weeks.
If you qualify, ESA severance pay is usually paid in addition to ESA termination pay.
That means an eligible employee could receive up to:
- 8 weeks of ESA termination pay
- 26 weeks of ESA severance pay
- 34 weeks combined under ESA minimum standards
However, this still may not be the full amount the employee is owed.
Can You Receive Both Termination Pay and Severance Pay?
Yes. In Ontario, an employee can receive both termination pay and ESA severance pay if they qualify for both.
- Termination pay replaces working notice.
- ESA severance pay is a separate payment for eligible long-service employees.
For example, an employee who worked for a large employer for 10 years may be owed both ESA termination pay and ESA severance pay.
What Is Common Law Reasonable Notice?
Common law reasonable notice is the amount of notice or pay in lieu of notice that a non-unionized employee may be owed when fired without cause.
This is separate from ESA minimums.
The ESA sets the legal floor. Common law may provide a higher total entitlement.
Common law reasonable notice is based on factors such as:
- age
- length of service
- position
- compensation
- availability of similar work
- the terms of the employment contract
In some cases, common law notice can amount to many months of compensation — as much as 24 months’ pay.
Can an Employment Contract Limit Common Law Notice?
Yes, but only if the termination clause is legally enforceable.
Some employment contracts try to limit employees to ESA minimums. If the termination clause is valid, it may reduce the amount the employee can claim.
But many termination clauses are outdated, poorly written, or unenforceable.
If the clause is invalid, the employee may be entitled to common law reasonable notice.
Common Misunderstandings
“My employer called it severance, so it must include everything.”
Not necessarily. Employers sometimes use the word “severance” to describe a package that only includes ESA termination pay or a small amount above the minimum.
“One week per year is the standard.”
One week per year is often connected to ESA minimums. It is not the rule for full common law notice.
“I have to sign a release to get my ESA minimums.”
Your employer generally can’t withhold ESA minimum termination pay or severance pay just because you refuse to sign a release. A release is usually required only if your employer is offering more than the legal minimum.
“If I get termination pay, I can’t get severance pay.”
False. If you qualify, ESA severance pay is paid in addition to termination pay.
Examples
Example 1: Two-year employee
An employee worked for a company for two years and was fired without cause.
- They may qualify for ESA termination pay. They likely do not qualify for ESA severance pay because they have less than five years of service.
- However, if they are non-unionized, they may still be owed more under common law depending on their age, role, contract, and job market.
Example 2: Eight-year employee at a large company
An employee worked for a large company for eight years and was fired without cause.
- They may qualify for ESA termination pay and ESA severance pay.
- They may also be owed common law reasonable notice if their employment contract does not validly limit their rights.
Example 3: Long-service employee offered only ESA minimums
An employee worked for the same employer for 18 years and was offered only the ESA minimum.
- That offer may be much lower than their full legal entitlement.
- Before signing, they should get legal advice and estimate their potential common law notice.
What Should You Do Before Signing a Termination Package?
If your employer gives you a termination package, take these steps:
- Do not sign immediately. You do not have to accept the offer on the spot.
- Do not rely only on HR’s explanation. HR works for the employer.
- Save your documents. Keep your termination letter, severance offer, employment contract, pay records, bonus plan, and benefits information.
- Check whether the offer is only ESA minimums. Many first offers are far below common law entitlements.
- Get legal advice before negotiating. Responding the wrong way can hurt your ability to recover more.
Get Your Termination Package Reviewed
If you were fired, laid off, or let go in Ontario, do not assume your employer’s offer is fair.
The Ontario employment lawyers at Samfiru Tumarkin LLP can review your termination package, explain the difference between termination pay, severance pay, and common law notice, and help you pursue the compensation you are owed.
Frequently Asked Questions
Is termination pay the same as severance pay in Ontario?
No. Termination pay and ESA severance pay are different. Termination pay replaces working notice. ESA severance pay is a separate payment for some long-service employees.
Can I get both termination pay and severance pay?
Yes. If you qualify for both, ESA severance pay is usually paid in addition to ESA termination pay.
How much termination pay do you get in Ontario?
ESA termination pay is based on length of service and is generally capped at eight weeks.
How much severance pay do you get under the ESA?
ESA severance pay is generally one week of regular wages per completed year of service, plus a prorated amount for completed months in a partial year. It is capped at 26 weeks.
What is common law reasonable notice?
Common law reasonable notice is the amount of notice or pay in lieu of notice that a non-unionized employee may be owed beyond ESA minimums. It is based on factors such as age, service, position, compensation, contract language, and job market.
Is common law severance the same as ESA severance pay?
No. ESA severance pay is a specific statutory entitlement. Common law reasonable notice is a broader potential entitlement for many non-unionized employees.
Do I have to sign a release to get termination pay?
Your employer generally can’t require you to sign a release to receive ESA minimum termination pay. Be careful before signing a release, because it may prevent you from pursuing additional compensation.
Can my employer call termination pay “severance pay”?
Employers sometimes use these terms loosely. What matters is what the package actually includes and whether it reflects your full legal entitlements.
Should I accept my termination package?
Do not accept a termination package until you understand whether it is fair. Many offers are based on ESA minimums and do not include full common law entitlements.
Do unionized employees get termination pay or severance pay?
Unionized employees usually have rights under their collective agreement. If you are unionized, speak with your union representative.