Severance Pay in Alberta

Severance Pay in Alberta

Severance pay in Alberta is required when a non-unionized employee is let go, fired, laid off or has their employment terminated without cause by their employer. In the case of an employer terminating a relationship with an employee, they must provide notice of the termination, severance pay, or a combination of both. The amount of severance you receive will depend on your individual situation.

In Alberta, severance pay is a minimum of one week’s pay after 90 days of employment, up to a maximum of 24 months’ pay for a full severance package. This amount is arrived at through the province’s Employment Standards Code (ESC) and the our common law court system.

The dedicated employment lawyers at Samfiru Tumarkin LLP in Alberta have years of experience negotiating severance packages, and getting clients what they are legally owed. If you have been let go from your job, contact us today for a consultation to find out what your rights are.

Watch the video below from the Employment Law Show and read on to learn more about your severance rights.

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How much severance pay should I get in Alberta?

The amount of severance pay you should receive is determined by common law and Alberta’s Employment Standards Code (ESC).

Full severance pay (common law)

Common law severance is set directly by our courts, and influenced by a number of factors. This type of severance often provides an employee with far more compensation than the ESC.

The following factors are used to calculate common law severance pay in Alberta:

• Age
• Length of employment
• Position and salary
• Availability of similar employment
• Bonus
• Commission
• Benefits
• Overtime pay

The Alberta Severance Pay Calculator was created to provide a quick understanding of how much severance pay you may be entitled to receive upon termination, based on the above components.

Before you accept ANY severance offer, it is important to have an experienced Alberta employment lawyer at Samfiru Tumarkin LLP review it first. Over 90% of companies offer far less severance pay to terminated employees than they are legally owed. A wrongful dismissal in Alberta occurs when a person does not receive enough severance. If you find yourself in this situation, you need to contact our team immediately to confirm what you are rightfully entitled to.

WATCH: Employment Lawyer Lior Samfiru explains when you can get severance on an episode of the Employment Law Show.

Severance under the Employment Standards Code

The ESC guarantees the minimum amount of severance pay you will receive when you lose your job. The amount depends on your length of service as an employee.

These are the ESC minimums, and you can negotiate a better settlement than the one laid out in the guidelines above with the help of an experienced employment lawyer. Contact our firm for more information.

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What is the maximum severance pay?

Severance pay can be as much as 24 months’ pay for a non-unionized employee in Alberta. This amount is based on an individual’s provincial and common law entitlements.

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Is severance pay mandatory in Alberta?

Yes, severance pay is mandatory in Alberta under the following conditions:

• Your employment is terminated unilaterally by the employer, either through a termination without cause or constructive dismissal;
• Your employer incorrectly fires you “for cause”, which happens in many situations; or
• You are not provided a working notice period, or the period is not long enough and compensation is still required.

If you are the one to submit notice to your employer that you want to leave the company but your employer decides to let you go before the end of the notice period, then your employer has to pay you severance for the remainder of that period.

Severance is not mandatory in the following situations:

• When you quit without providing notice
• When you resign or retire
• When your limited-term contract ends
• When you are given the option to take a different position with the company
• When you leave the firm, and the situation is out of the employer’s control

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How does an employment contract affect my severance?

An employer will attempt to use an employment contract to avoid paying your full common law severance pay. They will rely on a termination clause with legal language that restricts you to your minimum entitlements under the ESC.

In many cases, employers fail to create legally acceptable termination clauses, or do not update them routinely to keep pace with changes in the law. Therefore, a large number of employment contracts in Alberta contain invalid clauses about severance pay, meaning that you must receive full severance when let go from your job.

Make sure you check your employment contract (if you have one), or any relevant employee handbook or guidelines provided by the employer, as your employer may be obligated to provide you with a more generous amount of severance pay than required by the ESC. If you are in a union, you must consult your collective agreement and your union for this information.

The employment lawyers at Samfiru Tumarkin LLP have reviewed and successfully argued against countless employment contracts, resulting in significant severance package amounts for our clients.

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How is severance pay provided to an employee?

Severance pay can be paid to an individual in Alberta in one of three ways: as a lump-sum payment, as salary continuance, or dispersed in a series of payments over a period of time.

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Do I have to pay tax on severance pay?

Tax is paid on severance, as it qualifies as part of your employment earnings.

The amount of tax you pay will generally depend on your employer. You can receive your severance as a lump sum, and it will be taxed at the source. If you decide to place your severance amount in a Registered Retirement Savings Plan (RRSP), or a Tax-Free Savings Account (TFSA), then you can defer paying your taxes until the amount is withdrawn later. If you decide to defer your severance payment and receive it later, you can delay paying taxes on your severance.

Contact an experienced lawyer to help you determine your best possible outcome when considering tax on your severance package.

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Should I contact Employment Standards in Alberta to get severance pay?

No. You should not contact Employment Standards to help you get your severance pay, as they will only help you obtain your minimum entitlements under the ESC. We can help you get complete and fair compensation under common law, which can be many months more than what the government provides.

Contact an employment lawyer at Samfiru Tumarkin LLP today to get a comprehensive understanding of what your rights are, how much severance you may be owed, and how to secure it.

More resources on severance pay

• Sale of business in Alberta: Rights to severance

• Rights to severance during a mass layoff in Alberta

• Wrongful dismissal in Alberta

• Employment Insurance and Severance in Alberta

Comprehensive services for Alberta employees

Our employment lawyers have successfully represented thousands of non-unionized individuals in various regions across Alberta, B.C. and Ontario.

In addition to severance package negotiations, we can assist you on a broad range of employment matters in Alberta, including:

For a comprehensive overview of employment, disability, and personal injury law, explore our Law Essentials page.

If you are a non-unionized employee who needs help with a workplace issue, contact us or call 1-855-821-5900 to get the advice you need and the compensation you deserve.