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Looking to Learn More About Severance Pay? Here Is All That You Need To Know

Soni Law, employment law, employment termination lawyer, wrongful termination lawyer

Losing a job can be difficult for anyone. However, as daunting as it may be, it is important to know your legal rights so that you don’t end up with the raw end of the deal. One such aspect of job termination is severance pay. By definition, the term refers to the compensation that an employer pays an employee when the employer terminates the employee from the job for no fault of the latter.

In Canada, generally all employees, except construction workers, are eligible to severance pay, regardless of the size of the company and duration of employment. The ‘Common Law Severance’ provides between two-and-a-half months and thirty-six months of pay after keying in several factors.

However, an employee may not be entitled to severance pay if the signed employment contract has a termination clause that states that he is entitled to a different kind of payment based on a formula such as ‘minimum statutory severance’. If you would like to know more about the kind of severance pay that you are entitled to, it is best to talk to an experienced employment termination lawyer.

What does being ‘severed’ mean?

A person is said to be ‘severed’ from employment when the employer does any of the following things:
● Stops employing the person owing to insolvency or bankruptcy
● Gives constructive dismissal and the employee puts in his resignation within the prescribed period of time
● Lays off the person for 35 weeks or more, within a period of 52 consecutive weeks
● Lays off the employee when the business shuts down
● Provides the employee with a written letter of termination along with a two-week notice period, following which the employee puts in his resignation. In this case, the resignation has to take effect during the notice period to be eligible for severance pay.

What are the factors that determine how much severance pay you will receive?

If you have lost your job for no fault of your own, you are entitled to receive a certain amount of severance pay, along with benefits that come under the severance package or retiring allowance. To find out what this amount may be, it is best to review your salary document and terms of dismissal. If you have received an employee handbook and an offer letter when you started your employment, it might help to study these documents in detail. The following factors will then determine the amount of money you are likely to receive from your former employer:

● Any specific regulations prevalent in your territory or province
● Your contract of employment
● The duration of your employment with that particular employer
● The collective agreement of the union you may be under
● The reason for your termination

For industries such as air transportation and banking, the federal government regulates the severance pay, and the final decision regarding the sum rests with them.

When is the severance pay due?

Usually, your severance pay amount will be due on your next regular payday. You could also receive the payment seven days after the severance of your employment, whichever comes later. However, consulting an employment termination lawyer beforehand may help you guard your interests and negotiate better. In some cases, the employer may have to deliver the severance pay in installments. A written or electronic agreement between you and the employer will precede the payment of the severance amount in installments. In addition, the installment plan cannot stretch beyond three years.

Have you lost your job or do you believe that you are likely to, in the near future? Consult an employment termination lawyer. Make sure you understand all the benefits entitled to you.

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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.