Severance Pay Calculator Ontario (Feb 2024)

January 18, 2024
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Severance Pay Calculator 🇨🇦

How much severance pay should I get in Ontario?

In Ontario, the amount of severance pay that an employee is entitled to is determined by the court system. This is known as common law severance, and it is based on a number of factors, including the employee's length of service, age, and position.

In Ontario, the amount of severance pay that an employee is entitled to is determined by the Employment Standards Act (ESA) and common law. The ESA sets out the minimum amount of severance pay that an employee is entitled to, while common law can award employees more severance pay if they were terminated unfairly.

The case that serves as the backbone of severance package calculations in Canada is Bardal v. Globe & Mail Ltd., which dates back to 1960. In this case, the court established that employees are entitled to reasonable notice of termination, and that the amount of notice should be based on a number of factors, including the employee's length of service, age, and position.

The minimum amount of severance pay that an employee is entitled to is one week's pay for each completed year of service, up to a maximum of eight weeks' pay. However, employees may be entitled to more severance pay if they have a longer length of service, are older, or held a more senior position.

The amount of severance pay that an employee is entitled to can also be affected by the size of the company and the number of employees who are being laid off. If a company has a payroll of $2.5 million per year and 50 or more employees are being laid off over a six-month period, employees may be entitled to an additional one week's pay per year of service.

The maximum amount of severance pay that an employee can receive under the Employment Standards Act (ESA) is 26 weeks' pay. However, employees may be entitled to more severance pay if they have a valid contract that provides for more severance pay.

What is severance pay?

Severance pay is a form of compensation that non-unionized employees are entitled to when they’re terminated from their job without cause. In Ontario, the amount of severance pay an employee is entitled to depends on a number of factors, including their length of service, their age, and their reason for termination.

The amount of severance pay that an employee is entitled to is calculated using the Employment Standards Act (ESA) and the common law court system. The ESA sets out the minimum amount of severance pay that an employee is entitled to, while the common law court system can award employees more severance pay if they were terminated unfairly.

What’s the difference between severance and notice? 

Severance pay and notice are two different types of payments that an employee may be entitled to when they are terminated from their job.

  • Severance pay is a payment that’s intended to help the employee transition to a new job and cover their expenses during the transition period. Severance pay is not required by law in all cases, but it is common in Ontario.
  • Notice is a period of time during which the employee is still employed, but they are not required to work. During this time, the employee is still entitled to their salary and benefits. Notice is not required by law in some cases, such as when an employee is terminated for cause.

In Ontario, the minimum severance pay is one week's pay for each completed year of service, up to a maximum of 26 weeks. Employees who hold senior positions or earn higher salaries may also be entitled to more severance pay.

The amount of notice that an employee is entitled to depends on a number of factors, including the employee's length of service, age, position, and the reason for termination. In Ontario, the minimum notice is one week for each completed year of service, up to a maximum of 8 weeks.

How is severance pay calculated in Ontario?

The minimum amount of severance pay that an employee is entitled to in Ontario is calculated by taking the employee's number of completed years of service with their current employer and multiplying it by their weekly wages.

For example, if you earn $1,000 per week and worked for your current employer for 8 years, you’re entitled to a minimum of 8 weeks of severance pay, which in this case would equal $8,000.

With that said, length of employment only impacts the minimum severance pay you’re entitled to. Here are some other factors that affect the severance pay you may receive as well:

  • Length of employment: One week's pay for each completed year of employment, up to a maximum of 26 weeks.
  • Age: Older employees, particularly employees over the age of 45, are generally entitled to more severance pay, since it’s harder to find work at an older age.
  • Reason for termination: Employees who are terminated for reasons beyond their control, such as a plant closure, may be entitled to more severance pay than employees who are terminated for performance reasons.
  • The employee's position: Employees who hold senior positions are generally entitled to more severance pay than employees who hold entry-level positions.
  • The employee's salary: Employees who earn higher salaries are generally entitled to more severance pay than employees who earn lower salaries.
  • Experience and training: Employees with greater amounts of experience and training are generally entitled to more severance pay than employees with less.
  • Overtime pay: Employees who consistently work overtime are generally entitled to more severance pay than employees who don’t work overtime frequently.
  • Benefits: Employees with large or generous benefits packages are generally entitled to more severance pay than employees with smaller packages.
  • Bonuses: Employees who receive large bonuses are generally entitled to more severance pay than employees with smaller or no bonuses.
  • Termination clause: Any termination, non-compete or non-solicitation clauses in an employment contract can restrict the amount of severance pay an employee is entitled to.

Other factors may also increase the severance pay you’re entitled to, including:

  • A poor economy
  • A bad faith dismissal
  • A toxic work environment
  • Lying about the reason for your termination
  • A short term disability or long term disability
  • Your health (including being pregnant or ill)
  • Being recruited from your previous job
  • Specialization in a particular field
  • Whether you’ve been fired for cause

How our Ontario severance pay calculator works

Our calculator is designed to take the most important factors that influence severance pay—length of service, age, position, and salary—and give you an accurate estimate of how much severance you can expect to receive. Remember that even though the Employment Standards Act (ESA) says you’re entitled to 1 week of severance per year of service, you will often receive much more if you work with a knowledgeable lawyer.

How To Use Our Severance Pay Calculator

To use our severance pay calculator, our calculator asks you for a few pieces of information:

  1. Your age: The older you are, the more severance pay you are generally entitled to.
  2. Your length of employment: The longer you’ve worked with your current employer, the more severance pay you are entitled to.
  3. Your position: The higher the position you held, the more severance pay you are generally entitled to.
  4. Your salary: The higher your salary, the more months of severance you are generally entitled to.

The calculator uses all of your inputs to calculate two numbers, which are shown to you after you hit the Calculate button:

  1. The minimum amount of severance pay you’re entitled to under the Employment Standards Act, 2000. This is simply one week's pay for each completed year of service, up to a maximum of 26 weeks.
  2. Our best estimate of how much severance pay you would receive if you were to work with an employment lawyer. This number will often be significantly higher (2x or more) than the minimum severance pay, which makes working with an employment lawyer a very good 

Why does the severance pay calculator say I can get more than the minimum required by law?

On top of the minimums stipulated in the Employment Standards Act, our severance pay calculator also considers many other factors behind the scenes, including the precedent set by other common law severance cases in Ontario, how easily you’ll be able to find new employment, and more.

The Employment Standards Act only stipulates the minimum amount of severance pay that an employee is entitled to, yet employees are often awarded significantly more than those minimums. For example, you will be awarded more if you have a written employment contract that provides for more severance pay or if you were terminated unfairly.

The calculator can be a very helpful tool for employees who have been terminated from their job. It can help employees to determine whether they are entitled to severance pay, and to calculate the amount of severance pay that they are entitled to.

How does an employment contract affect my severance?

Employers may try to use employment contracts to reduce or eliminate the severance they owe employees under common law. This can be done by including a termination clause in the contract that restricts employees to their minimum entitlements under the Employment Standards Act (ESA).

Many employers in Ontario do not create legally acceptable termination clauses, or they don’t update them when the law changes. This means that many employment contracts are unenforceable. If you have an employment contract, it’s worth checking what it says about severance, and if you’re unsure about your rights, it’s a good idea to speak to an employment lawyer.

How is severance paid out?

Severance pay in Ontario can be paid in one of three ways:

  • Lump sum: This is the most common way to receive severance pay. The employee receives a single payment that covers the entire amount of severance they’re entitled to.
  • Salary continuance: The employee continues to receive their regular salary for a set period of time, even though they are no longer working for the company.
  • Payments over time: The employee receives severance pay in a series of payments over a set period of time.

The way that severance pay is paid is usually determined by the employment contract. If there’s no employment contract, the employer and employee can agree on how the severance pay will be paid.

Do I have to pay tax on severance?

Yes, you need to tax on your severance pay, since severance is a form of taxable employment income. The amount of tax you pay will depend on how you receive your severance pay. 

Here’s a breakdown of the tax liabilities of the three most common forms of receiving severance:

  1. Tax on lump-sum severance: If you receive your severance pay in a lump sum, your employer will deduct a portion of your pay for income tax purposes. You also have the option of requesting that your severance pay be deposited into an RRSP or RPP.
  2. Tax on severance as salary continuance: If you receive your severance pay as salary continuance, you’ll continue to receive a regular salary and benefits for a set period of time. In this case, you will be responsible for making CPP and RPP contributions as well as paying EI premiums.
  3. Other arrangements: Some employers may allow you to make an arrangement to have your severance pay dispersed to you over a longer period. There may be tax benefits to doing this, depending on your situation.

Should I Work With An Employment Lawyer To Claim Higher Severance Pay?

There are a few reasons it’s a good idea to work with an employment lawyer as you claim your severance pay:

  1. Maximize your payout: Employment lawyers have the knowledge and experience to negotiate the best possible severance package on your behalf. They’ll help you to understand your rights and protect you from being taken advantage of.
  2. Paid when you win: Our hand-selected list of employment lawyers only accept payment once your case is over and they’ve successfully negotiated you  a higher severance payout. This means you can’t lose money. 
  3. Decades of experience: Employment lawyers have the knowledge and experience to know exactly what you’re entitled to and what you can expect to win in court or in a private settlement. They know the employment laws inside and out and can help you understand your rights.
  4. Hands-off approach: Employment lawyers can negotiate with your employer on your behalf so you don’t have to negotiate from a position of uncertainty. They can also represent you in court if your employer refuses to negotiate or offers you an unfair deal.

Severance Pay Calculator Ontario FAQs

What is the Employment Standards Act?

The Employment Standards Act (ESA) is a provincial law that sets out the minimum standards for employment in Ontario. It covers a wide range of topics, including wages, hours of work, overtime, vacation, and leaves of absence. The ESA also sets out rules for termination of employment, including severance pay.

The ESA applies to most employers in Ontario, with some exceptions, such as employers with fewer than five employees. The ESA also does not apply to some types of employment, such as employment by the federal government or by a religious organization. Companies headquartered outside of Ontario but employing people inside Ontario are subject to the same severance laws as companies headquartered inside Ontario.

If you believe your employer has violated the ESA, you can file a complaint with the Ministry of Labour. The Ministry of Labour will investigate your complaint and may take action against your employer, such as ordering them to pay you back wages or severance pay.

You can also file a lawsuit against your employer in court if you believe that they have violated the ESA. If you win your lawsuit, you may be entitled to damages, such as back wages, severance pay, and legal fees.

What is the maximum severance pay in Ontario?

The maximum amount of severance pay an employee in Ontario will receive generally tops out at 24 months’ pay.

Am I entitled to severance pay if I work for the government?

Yes, you’re still entitled to severance pay if you work for the government, but you have different rights than most employees in Ontario. If you’re terminated by the government, it’s best to get in touch with an employment lawyer by clicking here. 

How do I get more severance pay?

To maximize the severance pay you receive, you need to understand your rights and speak with an employement lawyer, who will help you get what you deserve:

  • Understand your rights: Before taking any other actions, speak with an employment lawyer, who will explain your rights under the Employment Standards Act (ESA) and common law. The ESA sets out the minimum amount of severance pay you’re entitled to, while common law can award you more severance pay than what the ESA stipulates.
  • Don’t sign anything before speaking with a lawyer: Before signing any severance agreement, it is important to speak with an employment lawyer to make sure that you are getting the best possible deal. Once you’ve signed something, it is very difficult to change it, since severance agreements are legally binding contracts. That’s why it’s always to consult a lawyer before signing anything.

Do I really need a lawyer for my severance case?

If you want to get the best possible deal, yes, working with an employment lawyer is a good idea. An employment lawyer will review your case, help you understand your options, and negotiate with your employer on your behalf.

How much do employment lawyers cost?

Employment lawyers can cost a wide variety of 

All of the lawyers we’ve partnered with only charge their clients on performance, which means they only win if you win. It also means that your lawyer will be extremely motivated to get you the best possible deal, since that means they’ll be paid more, too.

The industry standard fee for severance law cases is around 25% – 30% of what the lawyer wins for you. Let’s use an example to show you how this works: 

  • Assume your weekly salary is $2,000 per week.
  • Assume the Employment Standards Act says you’re eligible for 15 weeks of severance pay, which is $30,000.
  • Assume your lawyer is able to get you a severance package of 55 weeks of severance pay, which is $110,000.
  • This means your lawyer has won you an extra 40 weeks of pay, which is $80,000 in additional severance pay
  • If the lawyer charges a 25% fee, their fee would be $20,000 (25% of $80,000). You would receive $60,000 + $30,000 (from the original 15 weeks) for a total of $90,000.

Is severance pay mandatory in Ontario?

In Ontario, severance pay is not mandatory in all situations. Severance pay is mandatory in the following situations:

  • When an employee is terminated unilaterally by the employer, either through a termination without cause or constructive dismissal.
  • When an employee is incorrectly fired “for cause”, which happens in many situations.
  • When an employee is not provided a working notice period, or the notice period is not long enough and more compensation is owed.

Severance pay is not mandatory in the following situations:

  • When an employee quits without providing notice.
  • When an employee resigns or retires (but not forced to quit).
  • When an employee's limited-term contract ends.
  • When an employee is given the option to take a different position with the company.
  • When an employee leaves the firm, and the situation is out of the employer's control.

Should I contact the Ministry of Labour about my severance pay?

No, you should not contact the Ministry of Labour about your severance pay, because the Ministry of Labour can only help you obtain the minimum amount of severance pay under the Employment Standards Act (ESA), not a full common law severance package. 

More importantly, once you file a claim with the Ministry of Labour, you waive your ability to retain the services of an employment lawyer, which may cost you tens of thousands of dollars.

If you want to pursue your full severance rights, you should always speak to an employment lawyer first. 

How important is age in determining severance?

Age is becoming an increasingly important factor in determining severance pay, as courts have begun to recognize that older workers face greater challenges in finding new employment after being laid off. There are a number of reasons for this, including tha older workers are seen as being less adaptable or less willing to learn new skills, and that they may have health problems that make it difficult for them to work.

As a result of these factors, older workers are more likely to suffer financial hardship if they’re laid off, so they tend to receive be awarded higher severance packages.

How do I know if I’ve been wrongfully dismissed?

Wrongful dismissal occurs when an employee is terminated without just cause or without proper notice. If you have been wrongfully dismissed, you may be entitled to damages, including severance pay, lost wages, and emotional distress.

To prove wrongful dismissal, you must show that your termination was:

  • Without just cause: This means that your employer did not have a valid reason to terminate your employment.
  • Without proper notice: This means that your employer did not give you the minimum amount of notice required by law.

Here are some examples of wrongful dismissal:

  • An employee is terminated because of their race, religion, gender, or sexual orientation.
  • An employee is terminated because they have raised concerns about workplace safety.
  • An employee is terminated because they have taken a protected leave of absence, such as maternity leave or parental leave.
  • An employee is terminated because they have refused to do something that is illegal or unethical.

If you have been terminated from your job, it is important to understand your rights. You may be entitled to severance pay, lost wages, and other damages. If you believe you have been wrongfully dismissed, you should speak with an employment lawyer to discuss your case.

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