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Severance Pay Calculator

  • Issued: April 2010
  • Content last reviewed: April 2010

See also: Guide to the Employment Standards Act--Severance Pay

Severance Pay Entitlement Tool Severance Pay Calculator

As you complete each step of this tool the next step will open and the previous step will close. You can return to any step by using the Edit link on the 'closed' step heading.

Use this calculator to determine the amount of severance pay that is owing. Employees who are covered by the ESA, and who have at least five years' employment with their employer, are entitled to severance pay when their employment is severed, if:

  • The employer has an annual payroll of at least $2.5 million, OR
  • The employee's employment has been severed due to a permanent discontinuance of all or part of the employer's business and the employee is one of 50 or more employees whose employment is being terminated within a six-month period.
To determine if there is an entitlement to severance pay, use the Severance Pay Entitlement Tool or refer to Your Guide to the Employment Standards Act, "Severance Pay".

Step 1: Determining the number of weeks of severance pay owing.
Enter the employee's completed years + months of employment:

Example: If you've worked 8 years and 6.5 months, enter "8" in the "Years" field, and in "6" in the "Months" field (for the number of completed months of employment).

Note: If an employer ends an employee’s employment without giving written notice as set out in section 57 or 58 of the Act, the employee’s length of employment for severance pay purposes is calculated as if notice had been given. See ESA section 57 and 58.

The values inputted for years and months of completed employment do not entitle the employee to severance pay; an employee with less than five years’ employment at the time of severance is not entitled to severance pay. You may choose to modify your response above, otherwise you may find the following resource useful to you:

All time spent by the employee in employment of the employer, whether or not active or continuous, is included in calculating his or her severance pay. However, if the employee is receiving an actuarially unreduced pension benefit (and his or her employment is severed on or after November 6th 2009) time for which the employee received service credits in the calculation of his/her pension benefit is not included in determining whether the employee is eligible for severance pay or in calculating the amount of severance pay owing. An “actuarially unreduced pension benefit” is a full pension, that is, the pension benefit produced by the formula is not reduced to reflect the fact that the employee is retiring before the normal age of retirement under the pension plan.)

The maximum amount of severance pay required to be paid under the ESA is 26 weeks. However, if the employment contract provides a greater right or benefit, the employer may be required to pay more than the 26 week minimum.

Step 2: Calculating the severance pay owing.

  
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Definition:

Regular Wages

These are wages other than overtime pay, vacation pay, public holiday pay, premium pay, termination pay and severance pay and certain contractual entitlements. For more information see ESA, s.5 (2).

Regular Wages for a Regular Work Week

For an employee who usually works the same number of hours every week, a regular work week is a week of that many hours, not including overtime hours.

  • Some employees do not work the same number of hours every week or are paid on a basis other than time (e.g. commissions, commission plus base wage, piece work, etc.) For these employees, the "regular wages" for a "regular work week" is the average amount of the regular wages earned by the employee for the weeks in which the employee worked:

    • in the 12 weeks immediately prior to the date their employment was severed, or
    • if their employment was severed as a result of a lay-off, in the 12 weeks immediately prior to the date the lay-off began.
Definition:

Statutory set-off deductions that can be made from the severance

Under the ESA, an employer can make the following set-offs and deductions from an employee’s severance pay. The deductions below are separate from income tax deductions. More information on income tax deductions

  1. Supplementary unemployment benefits the employee receives after his or her employment is severed but before the severance pay becomes payable to the employee.
  2. An amount paid to an employee for loss of employment under a contract of employment, and is based on length of employment, length of service, or seniority.
  3. Severance pay that was previously paid to an employee under this Act, a predecessor of this Act, or a contractual provision described in bullet #2 above.

Note: No information will be saved, for a record of information you have inputted in Step 2, print now.

* Payment of Severance

Generally severance should be paid within 7 days after employment ends or the next pay day, whichever is later. If an employer and their employee agree in writing or if the Director of Employment Standards agrees, the employer may pay the severance in installments. Installments cannot last longer than 3 years and, if the employer defaults on a payment, then the entire amount is due immediately.


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Employment Standards Information Centre
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