You are here
What is severance pay?
Clear language definitions to common legal terms.
In Ontario's Employment Standards Act (ESA), severance pay is not the same thing as termination pay, which is also called pay in lieu of notice. Severance pay is another payment that some people get when they lose their jobs.
You can find out more about termination pay in other questions including:
Who gets severance pay
You get severance pay only if you've worked at least 5 years for your employer and:
- your employer pays wages of at least $2.5 million a year, or
- at least 50 people will be losing their jobs within a 6-month period because the business is being cut back.
The rules about severance pay are very complicated.
The Ministry of Labour has an online Severance Entitlement Tool you can use to figure out if you get severance pay.
Losing the right to severance pay
You won't get severance pay if your employer is closing down their business because it was affected so badly by a strike that they can't continue.
There are other reasons that you can lose your right to severance pay. For example, this could happen if your employer offers you another job and you don't accept it.
How much is severance pay
The basic rule is that severance pay is one week's pay for each year you've worked for your employer. But the most you can get is 26 weeks.
The Ministry of Labour has an online Severance Pay Calculator you can use to figure out how much severance pay you get.
When and how you get severance pay
The ESA says that if your employer owes you severance pay, they have to pay you by the later of these two dates:
- 7 days after your job ends
- your next regular payday
Or, your employer can give you severance pay in smaller payments or installments, if:
- you agree in writing, or
- they apply to the Director of Employment Standards at the Ministry of Labour and the Director approves it.
Your employer has to give you all of your severance pay within 3 years. If they're paying in installments and miss a payment, they have to pay you the rest of the severance pay right away.
If your employer doesn't follow these rules, you can make a claim to the Ministry of Labour.