Losing your job can be a terrifying prospect, in Ontario many employees are entitled to a severance payment at the end of their employment, understanding how much and when such a payment is to be made can take some of the fear away from a job loss.
What is Severance Pay
Severance is a payment to an employee at the end of their employment that is distinct from pay-in lieu of notice. Severance is dealt with differently for federally regulated industries (i.e.: banking), for the purposes of this article we will only be examining severance pay for provincially regulated industries, who are covered by the Employment Standards Act.
When Are You Entitled To Severance Pay?
Provincially regulated employees, covered by the Employment Standards Act (some workers are not covered, i.e.: agricultural workers) in Ontario are entitled to severance pay if their employer has a payroll of more than $2.5 million and/or if 50 or more employees have been fired or laid off within 6 months that have worked with the company for more than 5 years. In other words, small employers are exempt from paying severance.
Another consideration for severance is length of service of the employee. Only employees who have been with the company for 5 or more years are entitled to severance. Employees who were terminated for just cause (i.e.: illegal behaviour in the workplace) are also not entitled to severance.
In addition to severance pay, another consideration at the termination of employment is Notice of Termination or payment in lieu of notice. If you have been working with an employer for less than 3 years you are entitled to 2 weeks notice of termination or payment of two weeks additional pay instead of the Notice period. For each year of employment after 3 years, you should receive 1 additional week. These entitlements are present even for workplaces that would fall below the $2.5 million threshold.
How Much Severance Might You Be Entitled To?
There are basic rules for how much severance you should be entitled to, however certain factors have led to courts increasing the amount. The basic severance entitlement is 1 week’s compensation for every year worked for the employer, to a maximum of 26 weeks.
When is Severance Payment Due?
Severance should be paid either 1 week after the last day of employment or at the next pay period, whichever is later. However, if ordered by the Ministry of Labour, or if agreed to in writing it can be paid out in small installments.
Losing your job can be a difficult time for families. To ensure that you are getting the maximum amount of severance, you should contact an employment lawyer to review your case. Mehdi Au LLP has employment lawyers on staff who can assess your case.
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