Who Is Entitled to Severance Pay in Ontario?
Under Ontario’s Employment Standards Act, 2000 (ESA), an employee is entitled to statutory severance pay if all of the following apply (ESA s.64(1)–(2)):
- Your employment has been “severed” as defined under ESA s.63(1) and s.64(2); and
- You have worked for your employer for at least five years; and
- Your employer either:
- Has a global payroll of $2.5 million or more (ESA s.64(1)(a)); or
- Has permanently closed all or part of the business and terminated 50 or more employees within a six-month period (ESA s.64(1)(b)).
These ESA rules set the minimum severance an employee must receive. Many non-unionized employees are entitled to more through common law notice, depending on age, length of service, position, and the availability of similar work.
Learn more: Common Law Notice in Ontario
When Is Employment Considered “Severed” in Ontario?
For severance pay purposes, employment is considered “severed” when any of the conditions in ESA s.63(1) apply. Employment is severed when an employer:
- Dismisses or fires the employee;
- Constructively dismisses the employee and the employee resigns;
- Lays the employee off for 35 weeks or more in any 52-week period (ESA s.63(1)(c));
- Permanently closes the business (ESA s.63(1)(d)); or
- Provides written notice of termination and the employee resigns during that notice period with at least two weeks’ notice (ESA s.63(1)(e)).
ESA Severance Pay Requirements
Under Ontario’s Employment Standards Act, 2000 (ESA), an employee is entitled to statutory severance pay only if all of the conditions in ESA s.64(1) are met:
- You have been employed by the employer for at least five years; and
- Your employment has been “severed” as defined in ESA s.63(1) and s.64(2); and
- Your employer meets one of the following thresholds:
- The employer has a global payroll of at least $2.5 million; or
- The employer has permanently closed all or part of its business and has terminated 50 or more employees within a six-month period.
These statutory rules set the minimum severance entitlements in Ontario. Many non-unionized employees may be entitled to a higher amount through common law notice, which considers age, length of service, job duties, and the availability of similar employment.
Learn more: Common Law Notice in Ontario
How ESA Severance Pay Is Calculated
The ESA provides a formula for calculating statutory severance pay. If you qualify, you are entitled to:
- One week of regular wages per completed year of service, plus a pro-rated amount for partial years,
- Up to a maximum of 26 weeks of severance pay.
This ESA entitlement is separate from termination pay and from any additional common law severance that may be owed.
Severance Pay vs. Termination Pay in Ontario
Employees are often unsure about the difference between severance pay and termination pay. In Ontario:
Termination Pay
Termination pay compensates you for the notice period you should have received when your employment ends. It is based on length of service and can be up to 8 weeks under the ESA.
Severance Pay
Severance pay compensates long-service employees for the loss of their job. As noted above, qualifying employees may receive up to 26 weeks of severance pay under the ESA.
Combined, an employee may receive up to 34 weeks of ESA termination and severance pay. However, these are minimum standards only. Many employees are entitled to additional common law notice, which can be significantly longer than ESA notice periods.
For a detailed comparison, see: Termination Pay vs Severance Pay in Ontario.
How Much Severance Pay Can You Get in Total?
Your full entitlement may include:
- ESA termination pay;
- ESA severance pay (if you meet the ESA requirements); and
- Additional common law notice, which can extend your entitlement beyond ESA minimums.
Courts consider several factors when assessing common law notice, including your age, length of service, position, and how difficult it is likely to be to find comparable work.
You can start by getting an estimate of your notice period using the Monkhouse Law tool: Severance Pay Calculator.
Employees Who May Not Qualify for ESA Severance Pay
Some employees are exempt from ESA severance provisions, including:
- Certain federally regulated workers governed by the Canada Labour Code – learn more about Canada Labour Code employees;
- Specific construction employees; and
- Employees engaged in on-site maintenance of buildings, structures, roads, sewers, pipelines, tunnels or similar works.
However, even if ESA severance does not apply, many of these employees may still be entitled to common law notice. It is important to obtain legal advice about your specific situation.
How to Calculate Your Full Severance
Calculating your complete severance entitlement can be complex. A full assessment should take into account:
- ESA termination pay and ESA severance pay (if applicable);
- Your entitlement to common law notice;
- All components of your compensation, including salary, bonuses, commissions, benefits, and pension contributions; and
- Any contractual terms that may limit or expand your entitlement.
Employers often base offers on ESA minimums or partial calculations that do not reflect your full legal rights. Before accepting or signing a severance package, it is important to understand whether the offer reflects both ESA and common law entitlements.
Learn more about how layoffs can affect your severance: Layoffs in Ontario – Know Your Rights.
What to Do If Your Severance Offer Seems Incorrect
- Do not sign immediately. Employers often set short deadlines, but you are generally entitled to a reasonable opportunity to seek advice.
- Gather your documents. Collect your employment contract, termination letter, any severance offer, and recent pay information.
- Review your rights under Ontario law. Our guides on termination pay vs severance and layoffs in Ontario may be helpful.
- Use the calculator. Start with our Severance Pay Calculator to get a general sense of your notice period.
- Speak to an employment lawyer. A lawyer can assess whether the offer reflects your full ESA and common law entitlements.
Employees are often owed more than their employer initially offers, particularly where only ESA minimums were considered or where a termination clause may not be enforceable.
Speak With an Ontario Severance Lawyer
If you have been fired, laid off long-term, or offered a severance package, an employment lawyer with extensive experience in severance pay can help you understand whether the offer reflects your full ESA and common law entitlements. At Monkhouse Law Employment Lawyers, severance reviews and negotiations are a major part of our employment law practice, and our team regularly assists employees in securing fair compensation.
We represent non-unionized employees only and have helped thousands of employees across Ontario secure fair severance packages through negotiation and, when necessary, litigation.
To better understand your options before signing anything, you can review our past results here: Notable Case Results, or contact us for a free 30-minute phone consultation to discuss your situation.