Severance Pay and Termination Laws
The experience of losing a job is one that can be very stressful, regardless of whether you saw it coming or were thrown by surprise. Suddenly, you are dealing with a flood of emotions, trying to figure out where you’ll work next, and wondering how you’ll cover your bills in the interim. Depending on your circumstances, you may be entitled to certain compensation under Ontario’s employment laws.
Severance pay is a specific payment that employers must provide to employees who are terminated. It is an additional form of compensation in addition to termination pay and is designed to help employees financially bridge the gap between their final paycheck and their new salary. Severance pay is governed by the Employment Standards Act (ESA), and it is typically calculated at one week of wages per year of service, up to 26 weeks.
There are many ways an employer can offer severance pay Ontario to their employees, but they must be sure that they comply with the ESA. For example, if an employer offers severance pay in the form of a lump sum, they must ensure that they have complied with all of the ESA’s provisions. This includes paying the employee in cash, and ensuring that any deductions are made from the payment, such as income tax.
Severance Pay and Termination Laws in Ontario
Additionally, employers must make sure that they are not discriminating against an employee in determining their eligibility for severance pay. This can include considerations like race, sex (including pregnancy), age, and religion. Employers must also make sure that the severance pay they are offering is not below the minimum amount required under the ESA.
Some companies will try to reduce the amount of severance they must pay their employees by using poorly-worded termination clauses in their employment contracts. These clauses can often be interpreted in such a way that the company is not bound by the minimum requirements of the ESA, which can leave employees with little or no protection against wrongful dismissal.
In order to minimize the likelihood of such cases, it is important that all employees understand their rights. Employment lawyers in Toronto can explain the various rules that apply to termination and severance pay, and they can also assist with any disputes that may arise between an employer and an employee.
The Ministry of Labour recently made a regulation in response to the COVID-19 pandemic that changes how some of the Employment Standards Act (ESA) rules are applied during the pandemic period. This update impacts the application of severance pay, notice of termination, and constructive dismissal. It is important for both employers and employees to be aware of these changes in advance of the pandemic ending so that they can plan accordingly. The government’s temporary rules will expire on July 30, 2022. To learn more about these changes and how they will affect your business, contact us at Knit. We specialize in payroll and team management, and can offer expert advice on severance pay and other employment entitlements.
