What is severance pay?

If you’ve recently lost your job in Ontario, you may be wondering whether you’re entitled to severance pay. While many people assume severance is automatic, it’s important to understand that severance pay is not the same as termination pay.

Under Ontario’s Employment Standards Act (ESA), severance pay is a separate and additional payment that only applies to certain employees in specific situations.

Here’s what you need to know about whether you qualify, how it’s calculated, and what to do if your employer doesn’t follow the rules.

✅ Severance Pay vs. Termination Pay

Many workers confuse severance pay with termination pay (also called pay in lieu of notice). Termination pay is compensation for not receiving advance notice before your job ends. Severance pay, on the other hand, is extra compensation for long-term employees who experience significant job loss.

You may be entitled to both—but they are calculated and paid differently.

👤 Who Qualifies for Severance Pay in Ontario?

You’re entitled to severance pay only if you meet both of the following conditions:

1. You have worked for your employer for at least 5 years, and

2. One of the following applies:

• Your employer has an annual payroll of at least $2.5 million, or

• 50 or more employees are being terminated within a 6-month period due to business cutbacks or closure.

If you meet these conditions, you likely qualify for severance pay under the ESA. Because the rules are complex, you can use the Ministry of Labour’s Severance Pay Calculator to check your eligibility.

❌ When You Might Lose the Right to Severance Pay

Even if you meet the general criteria, some exceptions apply. You may lose your right to severance if:

• Your employer closes their business due to a strike that made continued operations impossible.

• Your employer offers you another reasonable job, and you refuse to accept it.

Each situation is different, and legal advice can help you assess your options if your employer claims you’re not entitled.

📊 How Much Severance Pay Will You Get?

The basic formula under the ESA is:

1 week of regular wages per year of service, up to a maximum of 26 weeks.

For example:

• If you worked 8 years, you may be entitled to 8 weeks of severance pay.

• If you worked 30 years, the maximum you can receive is 26 weeks.

The Ministry’s calculator can help you estimate the exact amount based on your employment history.

⏱️ When Will You Receive Severance Pay?

Your employer must pay you severance by the later of the following two dates:

• 7 days after your job ends, or

• Your next regular payday

📅 Can Severance Be Paid in Installments?

Yes—but only if:

• You agree in writing, or

• The employer gets approval from the Director of Employment Standards

Even then, your employer must finish paying the total amount within 3 years. If they miss a payment, they must pay the full remaining amount immediately.

🛠️ What If Your Employer Refuses to Pay Severance?

If your employer doesn’t pay you severance when you’re entitled to it, you can:

1. Contact the Ministry of Labour

   • File a claim for unpaid severance pay

   • The Ministry may investigate and order your employer to comply

2. Seek Legal Help

   • A licensed paralegal or employment lawyer can help you calculate what you’re owed and represent you in a claim

You generally have 2 years from the date your employer owed you the payment to make a claim.

🧾 Are You Covered by the ESA?

Not all jobs in Ontario are covered by the ESA. Some industries have exemptions or special rules. To find out if your job is covered, check the Ministry of Labour’s list of exemptions.

✅ Conclusion

Severance pay is a valuable protection for long-term employees in Ontario, but it doesn’t apply to everyone. If you’ve worked at your job for at least 5 years and your employer meets the qualifying conditions, you may be entitled to up to 26 weeks of severance pay—on top of your termination entitlements.

If you’re unsure whether you qualify or believe your employer hasn’t paid you fairly, Situ Legal Services can help:

• Review your employment and severance rights

• Calculate what you’re owed

• File a Ministry of Labour claim if necessary

👉 Book a consultation today to protect your legal and financial rights after job loss.