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How Does Severance Pay Affect Unemployment Benefits in Canada

If you have recently been terminated from your place of employment you may be entitled to severance pay. In Ontario, any employee who has been continuously employed by the same employer for at least three months is entitled to at least one week of pay for every year of employment. Employees who have been with the same employer for 5 years or more may be entitled to additional compensation. Though severance pay can be helpful, it doesn’t always cover your needs while you search for new employment. In that case, utilizing employment insurance benefits can be crucial.

But how does severance pay affect unemployment benefits in Canada? There are a few things you should keep in mind when considering claiming employment insurance after being terminated. At Soni Law Firm, we are expert dismissal lawyers and are here to help you understand and protect your rights as an employee. In this article, we will break down what you need to know about claiming EI after receiving severance pay.

For more information about severance pay see our previous article Understanding Severance Pay in Ontario.

Can You Collect Unemployment if You Take a Severance Package?

If you are entitled to severance pay from your employer, you may be wondering, can I collect EI if I receive severance pay? Though you cannot claim employment insurance benefits at the same time you receive your severance pay, accepting a severance package or pay does not exclude you from being able to claim employment insurance benefits in the future.

If you need to, it is important to ensure that you apply for employment insurance benefits soon after your termination. You do not have to delay your application for benefits if you are negotiating the amount of your severance package. You should be aware that you are not allowed to “double-dip” claiming EI while also receiving severance pay. If you were to do this, you would be required to pay back any benefit received during that period. You must always disclose earnings received and this may impact the amount of employment insurance benefit you are entitled to.

Can I Reject a Severance Package?

It can feel confusing to understand the rules surrounding employment insurance benefits and severance pay. If you are thinking it might be easier to reject your severance pay and simply claim employment insurance benefits, you may want to consider speaking with an experienced employment insurance lawyer.

If you have been with your employer for more than 5 years, it may be in your interest to consult with a lawyer about your severance package. There are many factors that can affect the amount of severance pay an employee is entitled to and accepting the initial package presented by your employer may not reflect your entitlements.

Your employment insurance benefits can be important to helping you bridge the gap between jobs, and you should utilize this benefit when you need it. Ensuring your severance pay reflects your entitlements will also help to bridge this gap. Always consult with an employment lawyer after being terminated to ensure you get what you are entitled to.

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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.