If you ever get the bad news that your employer is terminating your employment, you need all the financial support available while you get back on your feet and look for new work.

In this post, you will learn how to calculate severance pay in Ontario if you are only entitled to the legal minimums allowed in Ontario’s Employment Standards Act (ESA) (which must be clearly stated in your employment contract) or if your employment contract provides for more than the ESA minimums. You’ll also learn how severance is calculated if you don’t have an employment contract.

Regardless of which category you fall into, however, always speak with an employment lawyer to review your employment contract and ensure that you’re not owed further compensation if you are ever let go from work.

Calculating Severance Pay According to the ESA

If you are terminated without cause, you’re entitled to notice from your employer before the termination takes place. During this ‘notice period,’ you can continue to work while you look for a new job.

Your employer can also choose to pay you what you would have earned during the notice period and terminate the employment relationship effective immediately. This payment is called ‘termination pay ‘ or ‘pay in lieu of notice.’

Assuming that your employment contract clearly states that, upon termination, you’re only allowed the minimum notice period in the Employment Standards Act, and you’ve been with your employer for at least three months, you are entitled to a minimum of one week of notice for every completed year of service to a maximum of eight weeks.

If you’ve worked with your employer for five years or longer and your employer:

• Has a global payroll of at least $2.5 million; or
• Has laid off 50 or more employees in a six-month period because all or part of the business permanently closed

You are also entitled to severance pay in addition to any termination pay. The ESA minimum is one week’s pay for every year of service to a maximum of 26 weeks.

Calculating Severance Pay According to Your Employment Contract

If you’re terminated without cause, and your employment contract has clear terms regarding a notice period and severance pay, you simply add the two payments to calculate your severance pay.

Keep in mind that your employer can’t change their mind and decide to pay the ESA minimum termination and/or severance pay if your employment contract guarantees you longer notice and severance periods.

Calculating Severance Pay If You Don’t Have an Employment Contract

If you don’t have an employment contract, or the one you signed doesn’t speak to notice of termination or severance pay, or that clause in your contract is legally unenforceable, you could be entitled to severance pay according to “common law.”

Common law refers to cases decided in court. When it comes to severance pay in situations when there wasn’t a legally-enforceable employment contract or clause regarding notice of termination and severance pay, judges do not follow the minimum notice periods in the ESA.

Under a common law determination of a reasonable notice period and severance pay, several individual factors are considered, including:

• Age of the employee
• Length of service
• Position
• Availability of similar jobs
• The economic climate
• If the employee was in a ‘specialist’ role

Using these factors as a guide for how long it will reasonably take someone to find a new job, the resulting severance packages are usually much larger than what would be provided by the ESA. This is why it’s crucial to get an employment lawyer’s opinion on whether you have a legitimate claim for the higher entitlement amounts if you are ever let go from a job, regardless of the wording in your employment contract.