When you lose your job in Ontario, your employer may offer you a package that includes “termination pay,” “severance pay,” or simply a lump sum of money. While people often use these terms interchangeably, termination pay and severance pay are two entirely different legal entitlements under the Ontario Employment Standards Act (ESA).
Understanding the difference between severance and termination pay is the first step to ensuring your employer isn’t shortchanging you.
The Quick Answer: Termination Pay is given to almost every employee to replace the advance warning (notice) they should have received before being fired. It is capped at 8 weeks.
- Severance Pay is an additional payment reserved only for long-term employees (5+ years) working for large companies. It is capped at 26 weeks.
- Common Law Pay is what most employees are actually owed, combining both concepts for a payout of up to 24 months.
On This Page:
- 1. Termination vs. Severance Pay
- 2. What is Termination Pay?
- 3. What is Severance Pay?
- 4. Can I Receive Both?
- 5. Why Minimums Aren’t Enough
- 6. Get Legal Advice
At a Glance: Termination vs. Severance Pay
The easiest way to understand the difference is to look at who qualifies and how much the government mandates they are owed.
| Feature | Termination Pay (ESA) | Severance Pay (ESA) |
|---|---|---|
| The Purpose | To replace the advance warning (notice) you should have been given before being fired. | To compensate you for your long-term loyalty and the loss of your seniority. |
| Who Qualifies? | Almost every employee who has passed their 3-month probationary period. | Only employees with 5+ years of service at a company with a $2.5M+ global payroll. |
| Maximum ESA Payout | Capped at 8 weeks of pay. | Capped at 26 weeks of pay. |
What is Termination Pay in Ontario?
Termination pay in Ontario (also known as pay in lieu of notice) is the baseline standard for being let go.
By law, your employer must give you advance notice that your job is ending. If they want you to leave immediately — which is usually the case — they must pay you the wages you would have earned during that notice period. Under the ESA, termination pay is calculated at roughly one week of pay per year of service, up to a maximum of 8 weeks.
What is Severance Pay in Ontario?
Severance pay in Ontario is an additional, specific financial entitlement designed to reward long-term employees for their loyalty and compensate them for the loss of the “sweat equity” they built at the company.
Because it is a specialized payment, the ESA has strict criteria. You are only entitled to statutory severance pay if:
- You have worked for the company for at least 5 years; AND
- Your employer has a global payroll of at least $2.5 million, OR they are letting go of 50 or more employees in a 6-month period due to a permanent business closure.
Can I Receive Both Payments?
Yes. If you meet the strict 5-year tenure and $2.5M payroll requirements, you are legally entitled to receive both ESA termination pay and ESA severance pay.
For example, if you worked at a large corporation for 10 years and were fired without cause today, you would be owed 8 weeks of termination pay plus 10 weeks of severance pay, for a combined total of 18 weeks of minimum ESA compensation.
Why the ESA Minimums Are Not Enough (Common Law)
Employers frequently use the confusion between these two terms to their advantage. They will hand an employee a package that combines their ESA termination and severance pay, and tell them it is a “generous, full severance package.”
Do not fall for this. The ESA only guarantees the bare minimums.
Unless you signed a highly restrictive employment contract, your rights default to Ontario Common Law. Common law judges look at the Bardal Factors — your age, your position, your years of service, and the job market — to determine your true entitlements.
Under common law, your total payout (which legally combines the concepts of notice and severance) can equal up to 24 months of full pay, including your bonuses and benefits.
Review Your Package with Samfiru Tumarkin LLP
If you have been fired, do not sign your termination papers until a lawyer has reviewed them. Many of our clients are shocked to learn that the “standard” termination and severance pay they were offered by HR is actually tens of thousands of dollars short of what they are legally owed.
The Ontario employment lawyers at Samfiru Tumarkin LLP have the experience to cut through the legal jargon, challenge an unfair termination clause in your contract, and negotiate the absolute maximum compensation for you.