Severance and Termination Pay Ontario

What is Termination Pay?

Termination pay is compensation provided to employees when employment ends in lieu of notice. An employee is entitled to receive termination pay in a lump sum payment or through regular wages, ensuring compliance with statutory obligations.

Notice Requirements for Termination

Employers must provide a notice period or working notice before an employee’s employment ends. The length depends on the years of service, with a minimum amount defined by the Employment Standards Act. In cases of mass termination, specific requirements also apply, and an employment lawyer can clarify rights.

What is Severance Pay?

Severance pay is additional compensation owed to many employees with more than 5 years of service when their employment is severed. Ontario severance pay is one week per year of service to a maximum of 26 weeks. It is to be paid by lump sum unless the employee agrees to receive it over time. The employee cannot be required to work for their severance pay.

Requirements for Severance Pay

To be entitled to severance pay, an employee must meet specific criteria, including 5 years of service and the employer must have an annual payroll of over $2.5 million. Certain employees, such as those who work in construction are excluded from receiving severance pay. It’s vital to consult an employment lawyer to understand and maximize severance pay and termination entitlements.

Termination Pay vs Severance Pay in Ontario: What is the Difference?

Understanding the distinction between termination pay and severance pay is crucial for employees navigating job transitions in Ontario.

Termination pay compensates employees when their employment is severed without sufficient required notice or weeks notice, often paid as a lump sum payment or through regular weekly wages until the employee’s next regular pay date.

On the other hand, severance pay is specific to long-term employees who have been continuously employed and meet certain criteria under Ontario law, such as the year of service. Severance compensates for the difficulty of finding similar employment, and employers must adhere to the payment structure outlined in the law to ensure that employees are compensated fairly.

Both types of pay aim to support employees during job transitions, but their eligibility and calculations differ.

Calculation: Termination pay is simple to calculate, based on the length of employment, whereas severance pay involves additional factors and complexities, including non-continuous service.

Eligibility: Termination pay applies more broadly to most employees, whereas severance pay has stricter qualifications, tied to years of service and the size of the employer.

Context of Payment: Termination pay compensates for situations where proper advance notice of termination wasn’t given, while severance pay acknowledges long-term service.

The Role of a Severance and Termination Pay Entitlements Lawyer

An experienced employment lawyer plays a critical role in helping employees understand their rights to termination pay and severance pay. They ensure employees receive the maximum amount they are owed by law.

A lawyer can also clarify the payment structure, review employment contracts and determine entitlements to common law reasonable notice in addition to statutory entitlements. Employees facing layoffs or those unsure about their entitlement to termination pay amount can rely on legal expertise to address disputes over the number of weeks of notice, or violations of the required notice period.

With a lawyer’s guidance, employees can better understand their entitlements and secure fair compensation under Ontario’s employment laws.

Special Considerations for Federally Regulated Employees

For federally regulated employees, termination and severance pay rules differ from those under Ontario’s laws. The Canada Labour Code outlines unique requirements, including up to eight weeks’ termination notice, lay-off procedures, and compensation owed when employment is severed. These employees are entitled to termination pay and severance pay based on their years of service.

Consulting the Walter Law Group ensures employees receive fair treatment and the full compensation they are entitled to under federal and Ontario employment laws.

Contact Us Today

Severance and termination pay are key elements of employee compensation and workplace rights, providing financial support in different situations when employment ends.

They not only safeguard employees during transitions but also help employers uphold legal standards.

Understanding these terms is crucial for both employers and employees to ensure fairness and compliance with legal obligations.

Contact us today to learn how our experienced team can guide you through severance and termination pay matters, ensuring fair and legally compliant outcomes for all parties.