How to Calculate Termination Pay and Severance Pay in Ontario

In Ontario, when employees lose their jobs, they often aren’t sure how much compensation they are entitled to receive from their former employer. Because such events happen so rarely in a person’s career, it is unsurprising that most people aren’t familiar with the laws surrounding severance pay, termination pay and adequate notice for termination of employment.

In order to help Ontario’s workers gain a better understanding of their employee rights, the employment lawyers from JPAK have compiled this brief guide regarding statutory termination entitlements. For information about calculating your statutory termination pay and severance pay entitlements  and what to do if you believe your rights have been violated, read on.

Understanding the Employment Standards Act of Ontario

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The provisions of the Ontario Employment Standards Act, 2000 (the “Act”)  regarding termination of employment clearly lay out the conditions under which someone is eligible for statutory notice (or termination pay in lieu) and statutory severance pay.

Statutory Notice or Termination Pay in Lieu

Generally, an eligible employee with over 3 months (90 days) of continuous service is entitled to notice of termination or termination pay in lieu, ranging from 1 to 8 weeks, depending on the employee’s length of service.   The employer can provide advance working notice or termination pay in lieu.

All of the employee’s compensation and benefits plans must be maintained for the minimum statutory notice period, whether or not the employee is actively working.

Severance Pay

Most employees are also eligible for statutory severance pay if:

  • They have 5 or more years of service; and
  • The employer has an annual payroll of 50 (or more) people or a payroll budget of at least $2.5 million

It should be noted that statutory severance pay and statutory termination pay are not the same thing.  These are two separate entitlements.

General speaking, severance pay ranges from 5 to 26 weeks of pay, depending on the employee’s length of service.

Ineligibility

There are many situations where a terminated employee’s actions, or other considerations, could make them ineligible for statutory termination pay and severance pay. Some of the most commonly cited reasons include:

  • If the employee engages in wilful misconduct, disobedience or wilful neglect of duty;
  • An employee’s contract becomes impossible to perform due to an unforeseeable event or circumstance; or
  • The employee is terminated after refusing an offer of reasonable alternative employment with the employer.

To Discuss the Specific Details of Your Situation and Determine Your Eligibility, Contact a JPAK Employment Lawyer

Severance Pay Calculator

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The amount of termination pay and severance pay someone should receive is based on the length of employment and the amount of the employee’s average weekly pay in the 12 week period preceding termination.

Calculation Example

For example, an eligible employee with eight years and six months seniority should receive 8 weeks of termination pay plus 8.5 weeks of severance  pay, for a total of 16.5 weeks of combined pay.  If this employee’s regular weekly wage was $1,000 per week, then they would be owed at least  $16,500.

Use the Severance Pay Calculators with Caution

Using online severance pay calculators can be helpful in some cases, but they do not take accurately or precisely take into account all the factors that go into calculating an individual’s entitlements to a severance package.

Note that Courts do NOT use a pre-determined formula or severance calculator in determining one’s common law entitlements to notice of termination or payment in lieu.

Statutory Amounts are the Bare Minimum

Note that the Act only prescribes the minimum entitlement to termination pay and severance pay.   In most cases, a terminated employee is entitled to substantially more than the government-mandated minimums.

If you have been offered a severance package, make sure to have it reviewed by an experienced employment lawyer.

Contact JPAK for Legal Advice on Severance Negotiations

When Does Wrongful Dismissal Apply?

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If employees are offered an inadequate severance package, or the employer fails to provide adequate working notice, employees can pursue legal options, including initiating a wrongful dismissal claim against their former employers.

NOTE: A terminated employee cannot file a wrongful dismissal claim against their former employer while also pursuing a termination pay or severance pay claim through the Ontario Ministry of Labour.  Employees must decide which option makes sense for their situation, after speaking with an employment lawyer.

Contact JPAK Employment Lawyers – Ontario’s Employment Law Specialists

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At JPAK, our employment law group knows what it takes to protect employee rights. We can negotiate and resolve your wrongful dismissal claim, and if necessary, commence legal proceedings with the goal of obtaining the maximum amount of compensation you are entitled to.

Over JPAK’s 14 years of practice, our labour law firm has successfully represented countless clients and helped them receive a fair outcome in their severance package negotiations and wrongful dismissal claims.

When you contact us for a consultation, we will review your case and provide sound advice on how to proceed regarding your severance entitlements.  We will devise a cost-effective strategy with a view to maximizing your financial outcome.

By |2021-07-08T10:22:34-04:00July 8th, 2021|Article, Article-All|0 Comments

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