What Is Severance Pay Ontario?
Severance Pay Ontario
The experience of losing your job can be a devastating one. It’s often sudden and traumatic, pulling the rug out from under you in the blink of an eye. It’s hard to process what happened, let alone figure out where you will work next or how you will pay your bills. That’s why it is important to understand what severance pay Ontario really means and how much you may be entitled to when you are terminated from your job.
Severance pay is a payment an employer must give to employees when they are laid off or fired. It’s separate from and in addition to the notice of termination or pay in lieu of notice that is required under the Employment Standards Act, 2000 (ESA). In general, an employee’s severance pay is equal to 1 week of their regular wages for each completed year of service, plus 1/12 of a weekly wage for each additional completed year of service. There are some exceptions, such as for federally regulated employers or if the company is closing and at least 50 jobs will be lost within a six month period.
If you are entitled to severance pay, your employer must give it to you as soon as possible once you’re laid off or fired. They must also keep accurate records and provide you with a copy upon request. The Ministry of Labour has an online severance entitlement tool that can help you determine whether or not you are entitled to statutory severance pay and if so, how much.
What Is Severance Pay Ontario?
Depending on your situation, you might be able to negotiate the length of time you’re paid, how quickly you receive it and other terms and conditions related to it. For example, you might be able to ask your employer to include vacation days and other benefits you earned while employed at the company in your severance package. You could also ask them to transfer your severance pay directly into your Registered Retirement Savings Plan or your Quebec Pension Plan.
It’s important to note that your severance pay must be taxed just like any other income you earn. If you are receiving it in lump sum, your employer will deduct income tax based on your province and territory of residence and the amount of the severance pay. In some cases, you may be able to negotiate that your severance pay is not subject to tax.
It’s also important to remember that while the ESA sets out a minimum amount of severance pay, there is an even greater entitlement at common law that cannot be limited by an employment contract and is based on court decisions and precedents. Therefore, you should always have a Toronto employment lawyer review your severance pay to ensure that it is in line with your legal rights.