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Does Severance Pay Affect My Disability Benefits?

Are you currently receiving disability benefits from your employer and have also been given notice that your employment is being terminated? If so, you may be concerned about how severance pay will affect your current disability payments. Each employee and employer relationship is unique and no one-size-fits-all answer will apply to every situation. Generally, once your employment is terminated you will not receive disability payments from your employer, but you may be entitled to other benefits such as EI or CPP.

If you are wondering how your financial situation may be affected by obtaining a severance payment it is likely a good idea to speak with an accountant or calling Service Canada directly. Your situation is unique, and it is important that you understand your finances when you are faced with being let go from your job in relation to a disability. In this article, we will help you to understand what severance pay is and what you can expect from your employer when you are let go.

If you are concerned that your severance pay offer is too low or have concerns about wrongful dismissal, consider reaching out to the experts at Soni Law Firm. We are here to help you understand your rights and help you ensure you maximize your entitlements as an employee and are some of the top severance lawyers in Toronto.

What is Severance Pay?

When you have been dismissed by your employer of 5 years or more you may be entitled to severance pay. Severance pay is compensation that qualified employees receive to compensate for losses when they are dismissed from their employment. Losses go beyond financial losses and include factors such as loss of seniority. Generally, an employee is entitled to one week of pay for every year they have worked to a maximum of 26 weeks. There are many factors that can affect the amount of severance pay an employee will receive. In many cases, it is a good idea to reach out to an employment lawyer to ensure you obtain the best severance package available to you.

How Can I Know If I Am Entitled to Severance Pay?

If you have been working for your employer for a minimum of 5 years and your company has a payroll of $2.5 million or has severed the employment of 50 or more employees in a six-month period due to the closing of a business, you may be entitled to severance pay.

Should I Apply for EI After Getting Severance Pay?

Often employees that have been let go by their employer turn to Employment Insurance to aid them financially while they obtain work. It is important to understand that you will not qualify for EI until the severance period of your employment expires. Additionally, those who are on EI who then receive a severance package will be required to pay back the EI payments that have been received. Every person has a different financial situation and applying for EI may or may not be the best choice for you. Consider all factors when you apply for EI and understand that obtaining severance pay while on it will require you to pay it back.

Will My Disability Payments Stop When I Receive Severance Pay?

Disability payments related to your employment will generally stop once you have been dismissed from your employment. This has less to do with your severance package and is more related to the terms of your employment benefits. If you have a permanent disability you may be entitled to receive CPP. We also have a great in-depth article to help you understand what medical conditions qualify for disability in Canada. Your severance package should not affect your ability to claim CPP but it should be noted that any sources of income will be taxed and this should be kept in mind when preparing for paying taxes. It may be a good idea to consult an accountant to help you understand how receiving CPP and a severance package will affect you financially.

Can I Receive More Than My Severance Pay?

When an employee is terminated without cause, they may actually be entitled to compensation pay greater than merely their severance pay. This more generous entitlement is based on something called “common law entitlements”. Whether you qualify for even more generous compensation for your termination under common law entitlements will depend on your unique employment situation.

How Can I Know My Severance Pay is Adequate?

There is more to a severance package than just the dollar amount you receive. Before accepting a severance package, it is a good idea to reach out to a dismissal lawyer to help you understand your rights and ensure you receive an adequate package. If you have any concerns about your severance package offer or the circumstances of your dismissal do not hesitate to contact the employment law experts at Soni Law Firm


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About Post Author


Rahul founded Soni Law Firm, a boutique employment, labour, and human rights law firm, with the goal of taking his Downtown Toronto litigation experience and making it accessible to Ontario’s Main Street employees and employers.