Severance Pay in Ontario

How much severance pay should I get in Ontario?

Severance pay in Ontario is provided to non-unionized employees when they are fired without cause from their job. When an employee is “let go”, they are entitled to either working notice, pay in lieu of notice (which is commonly referred to as severance pay or termination pay), or a combination of both. The size of the severance package varies from one individual to another, depending on the situation.

In Ontario, severance pay is one week’s pay, up to a maximum of 24 months’ pay for a full severance package. This amount is calculated using Ontario’s Employment Standards Act (ESA) and the our common law court system.

The experienced employment lawyers at Samfiru Tumarkin LLP have years of experience in negotiating severance packages and getting clients what they are legally owed. Our Toronto employment lawyers and Ottawa employment lawyers regularly help people across the province, no matter the job or income level. Consult with Canada’s most positively reviewed employment law firm today!

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

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How is severance pay in Ontario calculated?

The amount of severance pay you should receive in Ontario is determined by looking at our common law and the ESA. This is how an employment lawyer at Samfiru Tumarkin LLP will calculate how much you are owed.

Full severance pay (common law)

Our court system determines an employee’s full severance pay in Ontario. This is known as common law severance, which judges establish via numerous court cases. The case that serves as the backbone of severance package calculations in Canada is Bardal v. Globe & Mail Ltd., which dates back to 1960.

The factors that Ontario employment lawyers rely on to calculate severance include an employee’s:

• Age

• Length of employment/years of service

• Position

• Salary

• Experience and training

• Ability to find new work

Other factors, including overtime pay, the value of benefits and any bonus, should be worked into the equation as well. A company can use these factors to determine either the value of an employee’s severance package, the amount of time the employee needs to work before a set termination date (working notice), or a mixture of both.

If your employer fires you without cause, and doesn’t pay you the right amount of severance, it is a wrongful dismissal. This happens in a vast majority of terminations. When it does occur, you must contact our firm to find out what you are really owed, and how to get it.

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Termination vs. severance pay in Ontario

If you are looking for a quick and easy way to calculate severance pay in Ontario, use the Severance Pay Calculator tool.

Employees are often entitled to higher levels of compensation under common law than what is set by the province’s ESA.

WATCH: Employment Lawyer Lior Samfiru provides a clear understanding of how severance pay works in a Season 3 episode of the Employment Law Show.

Severance under the ESA

Ontario’s ESA guarantees your minimum statutory severance pay.

If you have been continuously employed for at least 3 months, you are owed one week’s pay per year of employment with the company, with a maximum of eight weeks’ pay for 8 or more years worked.

You are also owed an additional one week’s pay per year of service if you have five or more years of service with a company and:

• Your company has a payroll of $2.5 million per year

• 50 or more employees are losing their jobs over a six-month period

Under the ESA, the maximum amount of severance pay you can receive in the latter situation is 26 weeks’ pay.

You should always speak to an employment lawyer at our firm before accepting a severance offer, to make sure you get the full amount.

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What is the maximum severance pay in Ontario?

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

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How do I get more severance pay?

You can get more severance pay in Ontario by having an employment lawyer that works in the province negotiate with your employer.

Companies often offer severance packages that are far below what someone should receive when they lose their job. An employment lawyer at Samfiru Tumarkin LLP can use various laws and factors to determine how much pay an employee should get, and enforce those rights with the employer. This method can increase the size of a severance package in Ontario by tens of thousands of dollars.

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Is severance pay mandatory in Ontario?

An employer must provide an employee with severance pay when they lose their job. Severance pay is mandatory in the following situations:

• 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 notice period is not long enough and more compensation is owed

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 (but not forced to quit)

• 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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Do companies and employers have to pay severance in Ontario?

Companies operating in Ontario must pay severance to an employee when they are fired or let go. This applies to small businesses, as well as federally regulated employers and companies headquartered in places outside of the province. An employer can’t ignore their legal duty to pay minimum legislated severance, and greater common law amounts when required.

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Can I request severance a few months after being let go?

Yes, you can ask your former employer to provide you with a proper severance package long after losing your job. Your right to compensation after a termination does not expire after a few days, weeks, or even months.

Employees in Ontario have up to two years (or 24 months) from the moment they lose their job to file a legal claim for full pay through an Ontario employment lawyer at Samfiru Tumarkin LLP.

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• Can I get more money after cashing a severance cheque?

It is important that you do not sign any termination papers when you lose your job. Otherwise, you may give up your right to get the correct amount of severance later on.

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How does an employment contract affect my severance?

An employer will attempt to use an employment contract in Ontario 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.

Most employers in Ontario fail to create legally acceptable termination clauses, or do not make proper updates when changes to the law occur. These issues often mean that the employment contracts is not enforceable.

Make sure you check your employment contract (if you have one), or any relevant employee handbook or guidelines that your employer provides you with. Depending on what they say, the company may have to provide you with a generous severance package. If you are in a union, you must consult your Collective Bargaining 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 provided to someone?

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 Ministry of Labour. The Ministry of Labour can only help you obtain your severance pay under the ESA. They cannot help you get a full common law severance package.

More importantly, once you file a claim with the Ministry of Labour in pursuit of severance, you waive your ability to retain the services of a severance pay lawyer at Samfiru Tumarkin LLP.Severance pay can be paid in one of three ways in Ontario:

• A lump-sum payment;

• Salary continuance, where the person continues to receive pay as though they still had their job; or

• Dispersed in a series of payments over a set period of time.

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Do I have to pay tax on severance?

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 go to the Ministry of Labour 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 Ministry of Labour. The Ministry of Labour can only help you obtain your minimum severance amount under the ESA. They cannot help you get a full common law severance package.

More importantly, once you file a claim with the Ministry of Labour in pursuit of severance, you waive your ability to retain the services of a severance pay lawyer at Samfiru Tumarkin LLP.

WATCH: Employment lawyer Lior Samfiru explains why the Ministry of Labour is not your best option for severance, in a Season 3 episode of the Employment Law Show.

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More resources on severance pay

• Do hourly employees get severance pay in Ontario?

• Difference between termination and severance pay

• Wrongful dismissal in Ontario

• Severance pay by company

• Mass layoffs in Ontario: Rights to severance

• Severance pay in the construction industry

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Comprehensive services for Ontario employees

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

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