What is a fair severance package in Canada?

Peloton offers membership to fired employees

Peloton saw unprecedented demand during the lockdowns of the pandemic. Recently, however, they fired 2,800 staff as the company moves to adapt to the post-COVID business landscape.  Peloton co-founder and executive chair John Foley issued a memo that outlined the “meaningful” severance packages its former employees would receive. They notably included a complimentary Peloton membership for the next year – a value of about $468.

What’s included in a fair severance package?

When an employee is let go, they are entitled to receive advance notice of the termination, which could be several months. Employers often choose to provide that advance notice in the form of a severance payment.

An employee receiving severance should expect to be compensated for everything he or she would have earned had they been employed through the months included in the notice of the termination. This includes base salary, compensation for benefits, allowances, bonuses and anything else an employee would have received had they not been let go. Depending on your job, that could include things like memberships, including the one offered to outgoing Peloton employees.

LEARN MORE
• Federally regulated severance packages
• Severance pay for provincially regulated employees

WATCH: Employment lawyer Lior Samfiru explains how to determine if your severance packages is fair on a Season 5 episode of the Employment Law Show.

What factors are used to calculate severance pay?

Generally, the amount of severance pay received will depend on the length of time it should reasonably take the employee to find comparable employment. It is determined by looking at factors such as the employee’s length of service to the employer, the employee’s age, the level of specialization involved in the employee’s job, whether the employee exercises management functions, and the availability of similar employment.

What can an employer offer as part of a severance package?

Most employers will offer financial compensation for all lost components of compensation during the estimated period it would take the employee to find replacement work. However, benefits or perks that an employee received while employed can also be extended or offered in kind. For example, an employer might extend health and dental benefit coverage, continue to provide discounts, or include complimentary memberships – as was the case with Peloton. Employers also often offer to provide career transition services to employees as part of a severance package, which is meant to assist an employee in finding their next job.

How do I know if my severance package is fair?

A fair severance package is much more than a week’s pay per year of service. Severance is determined by considering an employee’s age, length of service, and position, and takes into account the amount of time it will take for an employee to secure new employment. Our firm developed the Severance Pay Calculator to provide a free tool that allows individuals to approximate the appropriate amount of severance they should receive. An employment lawyer at Samfiru Tumarkin LLP can also review the facts of your situation and inform you of how much you are owed.

What should I do if I am let go?

If you are let go without cause, you should contact an employment lawyer at Samfiru Tumarkin LLP right away so that we can assess whether or not the severance you are being offered is fair and reasonable given your circumstances.  Even if your employer asks you to, do not sign anything before having it reviewed by an employment lawyer. If your employer’s offer has not met your legal entitlements, our team can work to get you the compensation you deserve.