Severance Packages

When your employment is ended, or severed, you may be entitled to severance pay as a means of compensating your losses. This is different from termination pay, also known as pay in lieu of notice, which is meant to pay out an employee’s regular wages for the time they would have worked during their notice period. Depending on your circumstances, you may be eligible to receive both severance and termination pay.

Governed by the Employment Standards Act, a severance package can be subject to negotiation. Contact our employment lawyers today to schedule a free consultation and see how we might be able to help you receive the compensation you deserve.

How Do Severance Packages Work in Ontario?

There are two main guiding sources for severance packages in Ontario. Under the Employment Standards Act (ESA) an employee who has worked for a large company or employer for more than five years may be entitled to receive one week’s worth of wages for every year of their employment. The maximum amount is 26 weeks of pay.

While the ESA outlines standard minimum payments, employees may also be eligible for common law severance. Common law is a continuously evolving field of guidelines set by precedent in past cases, and it generally offers greater amounts – in some cases up to 24 months in severance.

Employment contracts typically have a termination clause, which may stipulate a particular formula for how your severance might be calculated. For assistance interpreting and/or negotiating this clause, or to address any contract-related issues, contact our employment lawyers today for a free consultation.

Why Do People Receive Severance Packages?

Severance packages are meant to ease the transition out of or between jobs, and to soften the blow of losing one’s employment. Regulatory bodies at the federal and provincial levels set out specific guidelines for how terminations are structured. The amount a person may be entitled to receive in severance may likewise depend on their specific employment contract, the collective agreement of their union, and more.

How Can a Lawyer Assist Me With Reviewing a Severance Package?

We can help calculate your entitlements and negotiate on your behalf, to ensure that you are receiving the severance amount you are rightly owed.

There can be many factors to consider to ensure you are justly compensated. Drawing on knowledge of the ESA as well as the common law, a Toronto severance package lawyer may be able to ensure that you are justly compensated. Severance packages can involve the additional complexities of benefits and pension issues. Whatever your circumstances, it may be in your best interests to work with an employment lawyer.

What Are Some Factors That Affect Severance Packages In Ontario?

Severance packages in Ontario may be affected by an employee’s age, the length of time served for the company or employer, their salary and seniority, their ability to find employment elsewhere, and other factors.

By understanding the specifics of your situation and making sure your case is presented with accuracy, a Toronto employment lawyer may be able to help you receive the severance you deserve.

What Are Some Legal Rights of Employees for Severance Packages in Ontario?

An employee who has worked for their employer for more than five years is entitled to severance under the ESA, if:

  • The employer’s total payroll exceeds $2.5 million, or
  • The employer has laid off 50 or more employees over the last 6 months.

If an employer does not provide a notice of termination, the employee may be entitled to termination pay – that is, the wages they would have received had they been given notice.

When entitled, an employee must receive their severance pay either within seven days of the termination, or from what would have been the employee’s next payday – whichever is the latter.

What Is the Difference Between Termination Pay and Severance Pay in Ontario?

Termination pay is typically paid in lieu of notice. This means that when an employer terminates an employee effective immediately, they are required to pay out an amount equaling the wages they would have been owed for the notice period.

Severance pay is set out in the Employment Standards Act, and is available to employees who have worked at a large company for more than five years. There may be a termination clause in their employment contract outlining the means by which severance will be calculated. Often, employees may also be eligible for common law severance, which generally offers higher amounts.

Unlike termination pay, an employee’s entitlement to severance is not contingent on whether or not they have received advance notice of the termination.

What Should a Comprehensive Severance Package Include?

A comprehensive severance package should compensate the employee for everything they should have earned had the employment continued for a certain amount of time following their termination. The amount of time for which they may receive severance depends on the particulars of their employment contract, the minimums set out in the ESA, and/or common law.

A severance package can include base salary, compensation for benefits, bonuses, and anything else the employee would have received had they not been let go.

What Are Some Tax Implications of Severance Pay in Ontario?

Severance pay is subject to income tax, which can differ in terms of whether you receive your severance in a lump sum payment or through continued salary severance pay. Speak with our employment lawyers today to learn more about what the tax implications may be in your case.

What Happens to Your Benefits And/Or Pension if You’ve Received a Severance Package in Ontario?

In Ontario, if you participate in a group pension, the employer is often obligated to pay the pension plan for the minimum period described in the ESA. However, employers are generally also obligated to continue your participation in the pension plan for an extended period of time beyond the statutory notice.

A severance package should include information on your pension benefits, and whether they are being continued for the employment common law notice period. If they are not being continued, the package should outline how you will be compensated for the loss of pension.

Benefits can at times end in a lump-sum severance payment, or continue through a continued severance package.

How Does Severance Pay Get Calculated in Ontario?

There are a few ways severance pay can be calculated in Ontario. The most common is to multiply the employee’s regular wage for a standard work week by the number of years the employee has served in this job, including the months of an incomplete calendar year.

What Should I Do if I’ve Been Given a Severance Package?

Review your severance package carefully, as they can often be complex, and consult an employment lawyer. At Howie, Sacks & Henry LLP, our employment lawyers may be able to help ensure that you receive a fair package for what you are rightfully owed.

What Is a Severance Offer Deadline?

A severance offer deadline may be a pressure tactic to have an employee accept an offer that may not meet their full entitlements. An employer may stipulate a date by which you must accept a severance offer. However, this date may not be legally enforceable.

If you have received a severance offer deadline, it may be of vital importance to consult a Toronto employment lawyer and make sure you are fully informed of your legal rights.

Are There Limitation Periods With Regards to Severance Packages?

Under the common law, you have two years from the moment of termination to pursue full severance pay from your employer.

Can Severance Pay Be Paid Over a Period of Time?

Severance can be paid, typically, in three methods:

  1. A lump sum payment,
  2. A continuance of salary, or
  3. A series of payments over a set period-of-time.

The ways in which severance is paid can be negotiated. Contact our Toronto severance package lawyers for support.

Can My Employer Give Me Advance Notice of Termination Instead of Severance Pay?

This depends on how long you have worked at the company, and in that position. For example, if you have been there for twenty years, and they offer you advance notice, you can sometimes receive severance pay for the remainder of the 24-month maximum period, should the advance notice be less than 24 months.

Contact Our Toronto Severance Package Lawyers Today For a Free Consultation

The amount you may be entitled to in a severance package can depend on a wide range of factors. To address the specific needs of your situation, and learn what compensation may be possible for you, contact our Toronto employment lawyers today and schedule a no cost consultation.

*Please be advised that the content of this article is intended as a general overview on the subject of severance packages in Ontario, and should not be construed as legal advice. For legal advice, please consult with an employment lawyer.

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