Severance for Employees

Severance is bonus compensation that must be paid to qualified employees whose employment is terminated. It is a bonus because it is money paid to a terminated employee in addition to pay in lieu of notice. Employees are entitled notice and severance. Thus, contrary to popular opinion, severance is not the same as “termination pay”, which is all the money paid to an employee upon termination of employment. In this regard, most termination packages given to employees include pay in lieu of notice and severance wrapped up into one figure called “termination pay”.

Severance pay is a statutory requirement, meaning it is imposed by statutes (i.e. laws like the Employment Standards Act) enacted by the government, and must always be paid if applicable (i.e. if the employee has 5 years of seniority and the employer has a $2.5-million-dollar payroll).

The most important thing to know about “severance” is that it is just a minimum. Ontario severance laws force employers to give only one of week of pay for every year of service, but no more. However, “common law” employment laws known as wrongful dismissal damages (i.e. common law compensation in lieu of notice and severance) award employees significantly more than 1 week of pay per year of service (usually at least more than 1 month per year of service) and have no maximum. Therefore, it is always more prudent for an employee to sue for wrongful dismissal in court rather than claim severance at the Ministry of Labour.

As well, common law notice, or wrongful dismissal damages, have no eligibility requirement, like severance laws do. Employees with one day of service under the common law often get more than what severance provides an employee of 5 years.

In summary, if you are considering asking your employer for more severance, think again. What you want is more common law notice (i.e. wrongful dismissal damages). In other words, don’t seek severance.

Read more in our detailed guide to severance.

Dutton Employment Law is a severance law firm.

If your employer has let you go, and you want a professional to review the terms of your termination / severance package, contact a Toronto severance lawyer today. Do not, however, go to the Ministry of Labour to ask for severance before seeing a lawyer. 99% of the time a lawyer can get you more money.