Severance pay refers to a specific payment required under Ontario’s Employment Standards Act (the “ESA”). Specifically, the ESA provides that an employer must provide payment to an employee in the amount of 1 week of wages per year of service, to a maximum of 26 weeks. It only applies to larger employers (those with a payroll of at least $2.5 million) and to employees who have been employed for at least five years.
Termination pay refers to any kind of payment required in relation to the termination of employment of an employee. This can include severance pay and payments based on common law principles. Therefore, termination pay is much broader and covers many forms of compensation that are not included within severance pay.
