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What is severance pay?

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What is severance pay?

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Reviewed: 
September, 2015
Answer

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.

1. Find out if you're covered by the Employment Standards Act

Ontario's Employment Standards Act (ESA) has rules that employers must follow.

But not all jobs are covered by the ESA. And in some cases, only parts of the ESA apply.

Use the Ministry of Labour's online tool called Industries and Jobs with Exemptions or Special Rules to find out if your job is covered by the ESA and which parts of the ESA apply.

You can also call the Ministry's Employment Standards Information Centre at 1-800-531-5551, 416-326-7160, or 1-866-567-8893 (TTY).

If the ESA does not cover your situation, check What laws apply to me as a worker? 

Reviewed: 
October, 2016
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2. Find out if you're eligible for 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.

Reviewed: 
October, 2016
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3. Figure out how much severance pay you get

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.

Reviewed: 
October, 2016
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