Severance Pay in B.C.

Severance Pay in British Columbia

Severance pay is a form of compensation provided to an employee in British Columbia by their employer when their job is terminated through no fault of their own. The severance package acts as financial support for an individual until they can find comparable employment elsewhere.

When a non-unionized employee is let go or permanently laid off, their employer must provide either reasonable notice, pay in lieu of notice (referred to as severance pay), or a combination of both. How much notice or severance pay an individual should receive is based on a number of factors.

In B.C., severance pay is a minimum of one week’s pay after three months 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 Act (ESA) and our common law court system.

Contact the proficient employment lawyers at Samfiru Tumarkin LLP in B.C. We have years of experience in negotiating severance packages, and getting clients what they are legally entitled to. Our employment lawyers and severance pay lawyers in Vancouver serve clients across the province.

Watch the video below from the Employment Law Show and read on to learn more about your severance pay and how to get it.

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How much severance pay should I get in B.C.?

The amount of notice or severance pay you should receive is determined through the Employment Standards Act (ESA) and common law, which is set by the country’s courts. An employment lawyer will weigh both options when determining what your severance package should look like.

Severance under common law

Common law severance is set directly by court decisions, and influenced by a number of factors. This type of severance often provides an employee with far more compensation than the ESA in B.C.

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

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

The B.C. Severance Pay Calculator was created to provide a quick understanding of how much severance pay you may be entitled to receive upon termination.

Before you accept ANY severance offer, it is important to have an experienced B.C. 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 B.C. happens when a person does not get the correct severance. Most employees are unaware of what a fair severance pay offer is, and will accept one that is far below what they are rightfully entitled to. Our wrongful dismissal lawyers in Vancouver work to ensure that you get the compensation you are legally entitled to.

Severance under the ESA

The ESA in B.C. establishes the minimum amount of severance pay that an employee is owed when they are let go from their job without cause. The amount of severance pay you will receive depends on your length of service as an employee:

• After 3 months of service: 1 weeks’ pay
• After 12 months of service: 2 weeks’ pay
• After 3 years of service: 3 weeks’ pay, plus 1 week of pay for each additional year of employment (to a maximum of 8 weeks)

The amount of severance guaranteed by the ESA does not include your full entitlements under common law. Talk to our B.C. employment lawyers in order to pursue a full severance package.

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What is the maximum severance pay in B.C.?

The maximum amount of severance pay you may receive is generally capped at 24 months’ pay.

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Is severance pay mandatory in B.C.?

Yes, severance pay is mandatory in B.C. 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.
• 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 reduce or eliminate the amount of severance they owe you under common law. They can do this through a properly-worded termination clause that restricts you to your minimum entitlements under the ESA.

However, most employers fail to create legally acceptable termination clauses, or do not update them routinely to keep up with changes in the law, resulting in invalid employment contracts.

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 ESA. 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 found flaws in many employment contracts, resulting in significant severance packages for our clients.

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How is severance pay provided to an employee?

Severance pay can be paid 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?

Yes, you will pay tax on your severance pay since it is a form of taxable employment income. How you are taxed will depend on your employer. Since there are two main ways in which you can receive your severance, in a lump-sum payment or through salary continuance, we will discuss the ways these two methods of receiving severance affect the amount of tax you pay.

Tax on lump-sum severance

If you decide to take your severance as a lump-sum amount, your employer is normally required by law to deduct a portion of your pay for income tax purposes (a “withholding amount”), but they will not make deductions for CPP or EI. You also have the option of requesting that your severance pay be deposited into an RRSP or RPP, in which case you will not be taxed when it is deposited, but you will have tax deducted from it when you withdraw an amount from your RRSP or RPP.

Tax on severance as salary continuance

If you decided to accept your severance as salary continuance, you will continue to receive a regular salary and benefits for the amount of time laid out in your severance agreement. In this case, you will be responsible for making CPP and RPP contributions as well as paying EI premiums, as applicable.

Other arrangements

Some employers may allow you to make an arrangement to have your severance pay dispersed to you over a longer period, such as over a number of years. There may be tax benefits to doing this, depending on your situation. Speak to an experienced employment lawyer to discuss your options so that you can optimize your severance package and obtain the compensation you are entitled to and deserve.

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Should I use the Employment Standards Branch to get severance pay?

If you are let go, fired or laid off from your job and want to pursue your full severance rights, you should NOT contact the Employment Standards Branch. They can only help you obtain your severance pay under the ESA. They cannot help you obtain a full common law severance package.

More resources on severance pay

• Sale of business in British Columbia: Rights to severance

• Rights to severance during a mass layoff in B.C.

• Wrongful dismissal in British Columbia

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Comprehensive services for B.C. employees

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

In addition to severance package negotiations, we can assist you on a broad range of employment matters in B.C., 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.