What is a severance package?

Severance packages, which usually consist of both and , are awarded to terminated employees. determined by the employee’s length of service and business regulations.

Do you get a severance package if you get fired?

In general, employees who have been dismissed for cause are not entitled to severance pay. However, if fired without cause, they can be entitled to severance pay based on their employment contract and any applicable legislation.

How do you calculate a severance package?

Typically, a severance package consists of extended benefits, income based on years of service, and unused vacation time. Considerations for the calculation include position, age, tenure, and corporate policy. The package is designed to help workers adjust to life after losing their jobs.

Is a severance package taxable?

Severance pay received in Canada, when it is part of a specialized package, is also subject to income taxes. If you receive a salary, included in your T4 slip. This severance payout forms part of your taxable income for the year, which might different tax bracket and tax you pay.

How much is severance pay in Canada?

Severance pay in Canada varies by province and agreement. one to two weeks’ salary for every year of employment, although there may be variations. The terms are determined by and provincial regulations.

Am I eligible for EI if I get severance?

Severance may delay your benefits but does not automatically disqualify you from EI. Receivables are seen as wages, which could postpone your eligibility for unemployment benefits. You still be if you meet the other requirements, such as having enough insurable hours and a valid reason for job separation.

Can my employer change the terms of my severance package?

Yes, but only under certain conditions. If you haven’t yet accepted or signed the severance offer, the employer may alter the terms. Consulting an employment lawyer helps ensure any changes meet legal requirements and respect your rights.

What are the common components of a severance package?

A severance package typically includes termination pay, extended benefits, outplacement assistance, accrued vacation pay, and sometimes a confidentiality clause. Additional components, like performance bonuses or prorated commissions, may apply. Reviewing your package with a lawyer can clarify its full scope.

How does the Ontario Employment Standards Act (ESA) affect my severance package?

The ESA sets minimum requirements for severance and termination pay, based on employment length and company size. It ensures eligible employees receive fair compensation, but you may be entitled to more than the minimum. Legal advice helps maximize your entitlements.

Can a lawyer help me increase the compensation in my severance package?

Yes, a lawyer can often negotiate improved terms, especially if the package doesn’t reflect your role or industry standards. Experienced employment lawyers assess your unique situation to help secure a more favourable severance arrangement, potentially increasing your compensation.

What is the difference between severance pay and termination pay?

Termination pay compensates for notice period loss, while severance pay applies if you’ve worked for five-plus years at a larger company. Severance aims to support long-term employees post-termination, whereas termination pay provides immediate compensation for employment cessation without notice.

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Why You Need a Severance Package Lawyer in Toronto

Termination is an unfortunate aspect of business for every employer. Employers have a legal responsibility to ensure that they provide employees with adequate notice, and appropriate remuneration in most circumstances. The laws around severance and termination can be complex, as they are dictated both by employment legislation as well as the common law. Seeking advice from an experienced severance package lawyer Toronto is key to ensuring that an employer has met their obligations and minimized any risk with respect to claims for wrongful dismissal.

The severance package lawyers at Sultan Lawyers work regularly with employers to provide guidance with respect to severance packages and employee terminations. We will review all of the relevant factors with an employer and assist with designing an individualized package that addresses all legal obligations including notice requirements and compensation.

What is severance pay?

Severance pay is compensation provided by an employer to a qualified employee when employment is severed. It is intended to address statutory obligations that may apply depending on the circumstances of the employment relationship, including seniority and length of service.

Is severance pay the same as termination pay?

No. Termination pay refers to the statutory minimum notice period under the Employment Standards Act. This compensation is paid upon dismissal in lieu of notice to any employee who was employed for at least three months. Termination pay is equivalent to one week’s pay per year of service. Certain exceptions apply, such as an employee who is terminated for cause.

Severance pay is paid over and above the termination pay amount. For qualifying employees, it is equivalent to an additional week of pay per year of service, prorated for any partial year of employment. Severance pay is capped at 26 weeks.

It is important to note that termination pay, and severance pay will be applied in the following circumstances:

Termination (without cause)
Layoffs or mass terminations
Constructive dismissal

Who qualifies for severance pay?

Not every employee requires severance pay upon termination. Severance pay is aimed at long-term employees, and will only be enforced in the following circumstances:

The employee has worked with the employer for at least 5 years; and
The employer:
1. has a payroll in Ontario worth at least $2.5 million; or
2. severed the employment of 50 or more employees in a six-month period because all or part of the business closed permanently.

Our Severance Package Services in Toronto

Upon termination, the employer provides the employee with a severance or termination package outlining the compensation and terms being offered. The package should be carefully prepared to address applicable legal obligations and reduce the risk of disputes. The package may include a release agreement, which can help limit future wrongful dismissal claims if it is properly drafted and legally enforceable.

Why Choose Sultan Lawyers as Your Severance Package Lawyer in Toronto

Employers choose Sultan Lawyers because severance decisions carry real legal and financial risk, and we help you manage both.

Our team advises employers across Ontario on designing severance packages that meet every statutory and common-law obligation while limiting exposure to wrongful dismissal claims. We combine the depth of a large firm with the responsiveness of a boutique practice, and we focus exclusively on employment and workplace immigration law.

When you need a package structured correctly the first time, we provide clear, practical advice you can act on with confidence.

Contact Our Severance Package Lawyers in Toronto Today

Sultan Lawyers regularly works with employers on the design of severance packages, ensuring each one meets legal obligations while protecting the business from the risk of litigation. Our team of severance package lawyers in Toronto will provide guidance to ensure that the employer has met all legal obligations to their employee while protecting themselves from the risk of litigation. Let us review your termination strategy and current severance package approach to help you identify potential legal issues and ensure you are considering the applicable requirements. Contact us online or call 647-691-9697 to arrange a no-cost introductory call with an employment lawyer.

Frequently Asked Questions

How Do Employers Calculate a Compliant Severance Package?

Employers should assess several factors when preparing a severance package, including the terms of the employment agreement, length of service, position, and the circumstances surrounding the termination.

A compliant package must address the employer’s obligations under the Employment Standards Act, 2000 and consider whether additional minimum obligations may apply under common law. Reviewing these factors before presenting a package helps employers make informed decisions and reduce the risk of future disputes.

What Should Employers Include in a Severance Package?

A severance package may include termination pay, statutory severance pay where applicable, continuation of benefits, outstanding vacation pay, and a properly drafted release agreement.

The terms should reflect the specific employment relationship and the employer’s legal obligations. A carefully prepared package provides clarity for both parties and helps address potential issues before they become disputes.

How Does the ESA Affect an Employer’s Severance Obligations?

The Employment Standards Act, 2000 establishes minimum obligations employers must follow when ending an employment relationship.

Depending on the circumstances, an employer may be required to provide termination pay, statutory severance pay, and other outstanding entitlements. Employers should also consider whether common-law obligations may apply beyond the minimum standards under the ESA.

What Is the Difference Between Notice and Severance Under the ESA?

Termination notice and statutory severance are separate obligations under Ontario employment law.

Termination notice or termination pay relates to the minimum notice requirements under the Employment Standards Act, 2000 when employment ends. Statutory severance pay is a separate obligation that applies only when certain requirements under the ESA are met.

Employers should review both obligations when preparing a severance package to ensure the terms provided meet applicable legal requirements.

How Can Employers Reduce the Risk of a Wrongful Dismissal Claim When Offering a Package?

Employers can reduce legal risk by ensuring severance packages are properly prepared before they are provided to an employee.

This includes reviewing the employment agreement, applicable legislation, and any common-law considerations that may affect the employee’s entitlements. A package that is carefully structured and clearly communicates the terms being offered can help minimize uncertainty and support a smoother termination process.

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Sultan Lawyers November 6, 2026