Calculating Severance Pay In Ontario: What You Need To Know

18 March 2023

3 Mins Read

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Nobody wants to think about it, but if you lose your job tomorrow, do you know how much of a cushion you have?

A quick way to find out is to use an online severance pay calculator, but the only way to know for sure is to speak to an employment lawyer and have them review your employment contract. With that being said, the information below is how severance pay is generally calculated in Ontario.

Figuring Out How Much Termination Notice You’re Entitled To

In Ontario, employers have the authority to terminate an employment contract for any reason, except when it involves discrimination against an employee based on religion, disability, race, or any other protected ground in the Ontario Human Rights Code.

If an employer decides to terminate an employee without cause, however, they must give reasonable notice, which allows the employee to continue working while they search for a new job.

The employer can also choose to give the employee a payment equal to what they would have earned during the notice period. This is known as “termination pay” or “pay in lieu of notice.” Employers will generally offer termination pay or working notice but can offer a combination of the two.

The Employment Standards Act (ESA) requires that employers provide a minimum of one week of notice for every year of service (should you pass the probationary period), up to a maximum of 8 weeks. If your employment contract clearly states that your notice entitlement is based on the ESA, then you may only be entitled to the minimum notice.

If your employment contract provides for a longer notice period, that notice period becomes the minimum notice you are entitled to.

Even if your employment contract has a clearly stated termination clause, if you are terminated without cause, always consult an employment lawyer to confirm whether or not there’s a possibility for you to receive further compensation.

If it can be argued that the termination clause in your contract is ambiguous, violates the minimum requirements of the ESA, or you don’t have an employment contract, then you may be entitled to a much longer notice period provided by the “common law.” More on this in the last section.

Severance Pay Entitlements in Ontario

If you’ve worked with your employer for at least five years, you may also be entitled to severance pay of one week’s pay for every year of service to a maximum of 26 weeks’ pay.

To qualify, your circumstance must meet specific requirements, which include working for an employer who was laying off employees and has a payroll of over $2.5 million.

Combining pay in lieu of notice with severance pay is commonly referred to as a severance package.

Severance Packages Under the Common Law

Common law entitlements are based on court decisions that have ruled that the ESA minimum entitlements do not provide someone with a reasonable amount of time to find similar employment.

Every common law claim for severance is unique and based on the employee’s personal circumstances and how they impact the employee’s ability to find a new job.

Some of the factors that are considered when determining a reasonable severance package under the common law include:

How old the employee is?
How long they worked for the employer and the position they held.
The availability of similar jobs and the current economic climate.

When all personal factors are taken into account as a whole, they often lead to an increased severance package entitlement beyond the legal minimum.

That’s why seeking an employment lawyer’s advice on whether you have a valid claim for higher entitlements is essential if you’ve been terminated without cause.

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Arnab Dey

Arnab is a passionate blogger. He shares sentient blogs on topics like current affairs, business, lifestyle, health, etc. To get more of his contributions, follow Smart Business Daily.