Severance pay compensates employees terminated without cause

Severance pay compensates employees terminated without cause, bridging income gaps during job searches. In Canada, it exceeds statutory minimums under common law, often reaching 24 months salary based on age, tenure, and role. Employers offer packages including notice pay, benefits continuation, and bonuses to avoid litigation. Workers qualify after minimal service, with tax implications treated as income. Negotiating maximizes entitlements while mitigating duties like job hunting.

Eligibility Rules

Statutory severance applies in Ontario for five-plus years service if employers meet payroll thresholds or mass layoffs occur. Federal rules mandate it after 12 months continuous work. Common law prevails absent valid contract limits, factoring employability challenges. Exclusions cover just cause firings or voluntary quits. Courts award higher sums for executives or long-term staff facing reemployment hurdles.

Calculation Methods

Formulas multiply regular wages by service length, capped at 26 weeks statutorily but expanded judicially. Lump sums, salary continuance, or installments structure payments.

– Tenure: One month per year service forms baseline entitlement.

– Age: Older workers receive extensions due to hiring biases.

– Position: Senior roles command higher packages typically.

– Benefits: Continuation covers health plans during notice periods.

Lawyers review packages for shortfalls, demanding more via letters. Employees sign releases cautiously to preserve rights. Employers budget via reserves, using mediation for settlements. Tax planning defers portions to RRSPs. Disputes head to tribunals, favoring documented evidence. Strong packages retain talent perception. In 2026, economic shifts prompt reviews. Victims rebuild via career coaching. Compliance training aids human resources. Seeking advice early unlocks full value, turning losses into stability.