If you are looking at a termination letter and a lump sum that seems disconnected from the years you put in, this article explains where that number should come from.
Two different entitlements
When employment ends without cause, two layers of entitlement can apply.
The first is the statutory minimum under the Employment Standards Act, 2000. Termination pay is based on your length of service. Statutory severance pay is a separate amount, and whether you qualify depends on your years of service and the size of your employer’s payroll. These minimums cannot be contracted away.
The second is common law notice, which developed through court decisions and is usually well above the statutory minimum. It applies unless an enforceable termination clause in your contract limits you to the minimums. Our Toronto employment disputes page covers both in more detail.
What courts weigh
There is no single multiplier. A court considers several factors together and asks what is reasonable in the circumstances.
Length of service
Longer service generally supports a longer notice period. It is not a straight multiplier, and two people with the same years of service can receive different notice periods depending on everything else about their situations.
Age
Older employees often receive longer notice, on the reasoning that finding comparable work may take more time.
The position held
Seniority, responsibility and how specialized the role was can lengthen notice. A narrow field usually means fewer comparable openings, which points toward a longer period.
Availability of similar work
The state of the job market for your particular role matters. Where comparable positions are scarce, that supports a longer notice period.
Other circumstances can also be relevant, such as having been recruited away from secure employment. Courts weigh these factors together on the facts of each case rather than applying them in a fixed order or weight.
Is severance really one month per year of service?
No. It is an informal shorthand, and it misleads in both directions.
Short-service employees are the clearest example. Someone with two years of service may receive considerably more than two months, because age, the nature of the role and the job market carry weight regardless of tenure. At the other end, notice periods do not simply keep scaling with every additional year of service.
Treating the rule of thumb as a floor or a ceiling is how people end up either accepting too little or holding out for a number that was never realistic.
What can reduce the notice period
An enforceable termination clause
Many employment contracts contain language limiting severance to the statutory minimums. Whether such a clause is enforceable is a separate question, and courts have found termination clauses unenforceable in a range of circumstances. Where a clause does not hold up, common law notice applies instead. Our article on whether your termination clause is enforceable covers this in more detail.
Earnings from new work
An employee is generally expected to make reasonable efforts to find comparable work after a termination. This is not an obligation you can be punished for breaching, but it has a practical effect: earnings from a new job during the notice period can reduce what a former employer owes. Keeping a record of your job search is worthwhile for the same reason.
Where the calculator fits
Our Ontario severance pay calculator gives an estimate based on the common factors, which is a useful starting point. What it cannot do is weigh the specific facts of your situation the way a lawyer or a court would, including the wording of your contract, the circumstances of your termination and the state of your particular job market. Treat the number as a range to test, not an answer.
Have your offer reviewed before you sign
Powell Litigation represents employees and employers across Toronto and Ontario in severance negotiations and wrongful dismissal claims. If you have just been terminated, our guide to what to do in the first 72 hours covers the immediate steps. Consultations are available in person, by phone and by Zoom. Contact us or call (437) 222-2234.
Frequently Asked Questions
Is severance really one month per year of service?
No. It is an informal rule of thumb, not a legal standard. Ontario courts assess reasonable notice by weighing several factors together, so some employees receive less than one month per year of service and others receive considerably more.
Is there a maximum notice period in Ontario?
Common law notice is commonly described as reaching up to about 24 months, and most cases fall well below that. Longer periods have been awarded in unusual circumstances. There is no fixed statutory cap on common law notice, and the amount depends on the facts.
Does my age affect my severance?
Age is one of the factors a court considers. Older employees often receive longer notice periods, on the reasoning that finding comparable work may take longer. It is weighed alongside length of service, the position held and the job market rather than on its own.
Do I have to look for a new job while negotiating my severance?
You are generally expected to make reasonable efforts to find comparable work. It is not an obligation with a penalty attached, but not looking can reduce what you ultimately recover. Keep a record of applications and interviews.
Does a new job reduce what my former employer owes me?
Earnings from new employment during the notice period are generally taken into account and can reduce the amount owed. The principle is that common law notice compensates for actual loss following the termination.
Legal Disclaimer
This article provides general information about Ontario employment law and is not legal advice. Reading it does not create a solicitor-client relationship with Powell Litigation. Notice periods depend on the facts of each case, and no article can tell you what yours is worth. Speak with an Ontario employment lawyer about your situation.