Severance Pay Compulsory in Ontario

The experience of being terminated from a job can be an emotionally stressful time. Whether you saw it coming or were caught off guard, losing your job is a life-changing event that can leave you scrambling to figure out where you’ll work next and how you’ll cover your expenses in the interim. As a result, many employees have questions about their employment entitlements and what they’re entitled to receive post-termination.

In Ontario, severance pay Ontario is a specific form of compensation paid to employees whose employment is terminated. It is a requirement of employers who have a payroll in excess of $2.5 million under the Employment Standards Act, 2000 (ESA) that employers must provide severance pay to eligible employees upon their termination. Severance pay consists of one week’s wages per year of service, to a maximum of 26 weeks. However, it’s important to note that severance pay is separate from – and in addition to – the minimum notice under the ESA.

Generally speaking, common law severance packages are higher than the minimums outlined in the ESA, but this isn’t always the case. There are numerous factors that go into determining a severance package, including an employee’s years of service and position. Additionally, the terms of their contract may stipulate that they are entitled to a higher amount than the statutory minimums.

Is Severance Pay Compulsory in Ontario?

An employer may also attempt to reduce or eliminate their severance package obligations by using an employment contract clause that is not compliant with the ESA. These clauses often limit an employee’s rights to the minimums set out in the ESA, which is why it is so important to review any employment contract you sign.

While some employers will offer to negotiate severance packages with employees, this is usually only in cases where the company is restructuring or closing and they are in need of workers. In these situations, the negotiations will typically focus on severance packages, not the overall terms of the employment contract.

When it comes to severance packages, an employment lawyer can be very helpful. They can assist in reviewing any employment contracts and ensuring that any agreements are compliant with the ESA, as well as advising on severance package amounts.

As a reminder, if you are receiving severance pay as a lump sum payment, your employer will deduct income tax from the total amount. They will not deduct Canada Pension Plan (CPP) contributions, Quebec Pension Plan (QPP) premiums and/or Employment Insurance (EI) premiums from your severance package. If you have any questions about severance pay, contact an experienced employment lawyer at Ball Professional Corporation in Toronto.

Stacey Reginald Ball is an employment lawyer with the firm and can assist you in your severance pay matter. She can be reached at (416) 832-0010 or by email at [email protected]. Ball Professional Corporation handles a variety of employment law matters, including wrongful dismissal. The firm is located in downtown Toronto. To schedule a consultation, please visit their website or call them at (416) 832-0010. They offer free initial consultations for all clients.

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