How Much Severance Pay After Termination?
The amount of severance pay you are entitled to depends on several factors. Common law reasonable notice is the default position unless the employment contract explicitly restrict the employee to Employment Standards Act statutory minimum termination pay and severance pay with employee consent.
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1 - What is Severance Pay?
Most companies provide a severance agreement that spells out the financial conditions of the employee's departure. In Ontario, a severance package is mandatory. The common everyday usage of the word severance is very different than what it meant in employment law context. How much "severance pay" you are entitled to legally depends on whether you intend to sue under common law or if you intend to file an ESA claim after you have been terminated.
How Much Severance Pay Do I Get?
Common Law vs. Employment Standards Act (ESA)
Common Law Severance, also referred to as reasonable notice, share nothing in common to ESA Severance and they mean very different things.
The Employment Standards Act breaks down the amount an employee might receive after termination into ESA termination pay (the amount you get depends on how long you have been working for the company) and ESA severance pay (an amount to award long term service employees if certain conditions are met).
Common Law Severance
The amount an employer is required to give to a terminated employee in the form of a severance package is decided by a variety of factors, such as the length of service, age, reason of termination, position held within the company, wages and compensation previously earned, whether the individual was actively recruited, and the general economy.
It is important to note that under common law in a wrongful dismissal case or a constructive dismissal case, all damages are packaged together and referred to as "reasonable notice".
ESA Termination Pay and Severance Pay
Under Employment Standards Act (ESA), the entitlement in the form of a severance package is broken up into two components, termination pay and severance pay. Click here to learn more about termination pay from the Ministry of Labour website. Click here to learn more about severance pay from the Ministry of Labour website.
Deadline to Pay Severance Package Under Employment Standards Act (ESA)
According to the Ministry of Labour:
Employees are entitled to termination pay and severance pay, if applicable, under ESA, seven days after their employment is ended or on their next normal pay day, whichever comes first.
An employer may, however, give severance pay in instalments with the employee's electronic or writing agreement or with the authorization of the Director of Employment Standards, Ministry of Labour, Training, and Skills Development.