Most people use “severance” to mean everything an employer pays when a job ends. Under Ontario’s Employment Standards Act, 2000, it means something narrower. Termination pay and statutory severance pay are two separate entitlements, with different eligibility rules and different calculations.
The distinction matters because many employees qualify for both, and a severance offer sometimes accounts for only one of them.
Termination pay
Termination pay compensates you for the notice your employer did not give. An employer that wants to end your employment without cause can provide working notice, pay instead of notice, or a combination of the two.
Under the Employment Standards Act, 2000, the amount depends on your length of service, ranging from one week after three months of service up to eight weeks at eight or more years. Almost every employee with at least three months of service is entitled to it.
Statutory severance pay
Statutory severance pay is a separate payment recognizing long service. It is not a substitute for notice, and it is not owed to everyone.
To qualify, you generally need five or more years of service, and your employer must either have a payroll of $2.5 million or more, or have ended the employment of 50 or more employees within a six-month period because part of the business permanently closed.
Where it applies, the amount is about one week of pay per year of service, up to a maximum of 26 weeks.
Side by side
| Termination pay | Statutory severance pay |
|---|---|
| Replaces the notice you were not given | Recognizes long service |
| Generally applies from three months of service | Requires five or more years of service |
| Employer size is not relevant | Requires a $2.5 million payroll, or a qualifying mass termination |
| Based on length of service | About one week per year of service |
| Up to eight weeks | Up to 26 weeks |
Can you receive both?
Yes, where you qualify for each. An employee with long service at a large employer may be entitled to termination pay and statutory severance pay, and those two together are still only the statutory floor.
This is where offers often fall short. An offer framed as a number of weeks of pay may cover termination pay while leaving out statutory severance pay, or may treat the two as the same thing.
Where common law notice fits
The Employment Standards Act, 2000 sets minimums. Common law notice, which developed through court decisions, is usually higher and is what most severance negotiations are actually about. It is assessed on factors including your age, length of service, the position you held and the availability of comparable work, and it applies unless an enforceable termination clause in your contract limits you to the statutory minimums. Our article on how much severance you may be entitled to explains that assessment, and our Ontario severance pay calculator estimates both layers.
What this means for your offer
Two questions are worth asking about any severance offer. Does it account for both statutory entitlements where you qualify for each? And is it limited to the statutory minimums when common law notice might apply?
If you have just been terminated, our guide to what to do in the first 72 hours covers the immediate steps. Powell Litigation represents employees and employers across Toronto and Ontario in employment disputes. Consultations are available in person, by phone and by Zoom. Contact us or call (437) 222-2234.
Frequently Asked Questions
What is the difference between termination pay and severance pay in Ontario?
Termination pay replaces the working notice your employer did not give, and applies to most employees with at least three months of service. Statutory severance pay is a separate entitlement recognizing long service, and it depends on both your years of service and your employer’s circumstances.
Do I get both termination pay and severance pay?
Many employees do. They are separate entitlements under the same statute, so qualifying for one does not affect the other. An employee with long service at a large employer may be entitled to both, and potentially to common law notice above both.
Who qualifies for statutory severance pay in Ontario?
Generally, employees with five or more years of service whose employer has a payroll of $2.5 million or more, or who ended the employment of 50 or more employees within six months because part of the business permanently closed.
Does my employer’s size affect what I’m owed?
It affects statutory severance pay, which has a payroll threshold. It does not affect termination pay, which depends on your length of service. Employer size is also not a factor in common law notice.
Is statutory severance pay the same as the severance package I was offered?
Usually not. A severance package is whatever your employer has offered, which may be the statutory minimum, more than that, or an amount based on a termination clause in your contract. Statutory severance pay is one specific entitlement that may form part of it.
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. Entitlements depend on your length of service, your contract and your employer’s circumstances. Speak with an Ontario employment lawyer about your situation.