Print  Print This Page

Severance Tool

  • Issued: April 2010
  • Content last reviewed: May 2013

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 The Tool: Getting Started
Who would find this tool useful
  • Employers trying to determine whether an employee is entitled to severance pay.
  • Employees trying to determine whether they are entitled to receive severance pay.
Use this tool
Who SHOULD NOT use this tool
Step 1: Determining whether the employment relationship has been severed.
Has the person's employment been severed?
Not sure?
  
Definition: Employment is "severed" when an employer:
  • dismisses or stops employing the employee, including where an employee is no longer employed due to the bankruptcy or insolvency of his or her employer;
  • "constructively" dismisses (please refer to Constructive Dismissal in the "Termination of Employment" section of the Guide) the employee and the employee resigns in response within a reasonable time;
  • lays the employee off for 35 or more weeks in a period of 52 consecutive weeks; or
  • lays the employee off because the employer permanently discontinues all of its business at an establishment (an "establishment" can, in some circumstances, include more than one location). Note: in some cases a sale may constitute a permanent discontinuance of business at an establishment.
  • gives the employee written notice of termination and the employee resigns after giving two weeks' written notice and the resignation takes effect during the statutory notice period. The statutory notice period is the period of termination notice that is required under the ESA. When more notice than what is required by the ESA is given, it is the last part of the notice (the part closest to the termination date) that is considered to be the statutory notice period. As an example; if an employee is entitled to four weeks of notice under the ESA and the employer provides eight weeks, it is the last four weeks of the eight week notice that is the statutory notice period
Based on the response provided, the employee's employment has not been severed within the meaning of the Employment Standards Act and is not entitled to severance pay. You may find the following resource useful to you:
Step 2: Understanding Entitlement to Severance.
Has the employee been employed by the employer for five or more years (this includes all time spent by the employee in employment of the employer, whether continuous or not and whether active or not)?

It is important to note that if a sale of business occurred in the past, and the employee continued to be employed with the new owner, this time may count towards his or her length of employment with that new owner. The sale may even pre-date the current employer's purchase of the business. Please refer to the Continuity of Employment in the Guide, as employment time with the previous owner(s) of the business may be included in determining length of employment.

Note: If an employer ends an employee's employment without giving written notice as set out in sections 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.

If the employee is employed by a building service provider when there has been a change in providers, and if the employee has stayed on with the new provider, an employer may also need to count the time spent with the previous provider(s) when determining the employee's length of employment. More information on Building Service Providers

  
Was the employee an employee who was receiving an actuarially unreduced pension benefit and whose employment was severed on or after November 6, 2009?

(This is relevant only if the pension benefit was provided under a defined benefit pension plan, where the benefit is calculated according to a formula involving years of employment and earnings. 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.)

  
Please Note
If an employee who is receiving an actuarially unreduced pension benefit has his or her employment severed on or after November 6, 2009, time for which the employee received service credits in the calculation of his or her pension benefit is not included:
  • when determining whether the employee is eligible for severance pay or
  • in calculating the amount of severance pay the employee is entitled to.

Continue to Step 3

Based on the response provided, the length of employment does not meet the criteria for severance pay. You may choose to modify your response above, otherwise you may find the following resource useful to you:
Step 3: Understanding Entitlement to Severance (continued).
Does the company have an annual payroll in Ontario of at least $2.5 million?

For example: If the employer employs 100 people in Ontario, and each employee has an annual salary of at least $25,000, then the company will have a payroll of at least $2.5 million.

Has the employer severed the employment of 50 or more employees (including the employee in question) in a six-month period because all or part of the business at the employer's establishment has been permanently discontinued?

An employer's establishment is considered to be the location where they carry out business. One establishment can include multiple locations of the same employer:

  • if the locations are located in the same municipality
  • if the employees have seniority rights under a written contract of employment that extend to the other locations and allows the employee(s) to displace another employee of the same employer.

  
Based on the response provided, the entitlement criteria to severance pay have not been met. You may choose to modify your response above or you may find the following resource useful to you:
Step 4: Employer exemptions to provide severance pay.
Do any of the following exemptions apply?

Please Note: If you answer "Yes" to any of the following questions, the employer is not obligated to pay severance pay.

The employee:

  • is guilty of wilful misconduct, disobedience or wilful neglect of duty that is not trivial and was not condoned by the employer;
  • is employed in construction, including employees who are working off-site and who are commonly associated in work or collective bargaining with employees who work at the construction site;
  • is employed in the on-site maintenance of buildings, structures, roads, sewers, pipelines, mains, tunnels or other works;
  • has refused an offer of reasonable alternative employment with the employer;
  • has refused reasonable alternative employment that is available to the employee through a seniority system;
  • on having his or her employment severed, retires and receives an actuarially unreduced pension benefit that reflects any service credits which the employee, had the employment not been severed, would have been expected to have earned in the normal course of events for purposes of the pension plan;
  • was employed to provide professional services, personal support services or homemaking services as defined in the Home Care and Community Services Act, 1994 for an employer who had a contract to provide those services with a community care access corporation within the meaning of the Community Care Access Corporations Act, 2001, if the employee’s arrangement with the employer allowed the employee to elect to work or not to work when requested to do so by the employer and the employee had his or her employment severed before October 1, 2012.
  • whose contract of employment has become impossible to perform (or has been frustrated) unless the impossibility or the frustration is the result of
    • A permanent discontinuance of all or part of the employer's business because of a fortuitous or unforeseen event
    • The employer's death
    • The employee's death, if the employee received notice of termination before his or her death
    • An illness or injury suffered by the employee
  • has his or her employment severed as a result of a permanent discontinuance of all or part of the employer's business that the employer can show was caused by the economic consequences of a strike.

  
Based on the response provided, the employee is entitled to severance pay. To determine the amount of severance pay owing under the ESA, please use the severance pay calculator.

Use the Severance Pay Calculator

Based on the response provided the employee may not be entitled to severance pay under the ESA. It is important to note that exemptions are meant to be interpreted narrowly; you may wish to seek legal advice before applying one of the above exemptions. There may also be a right under the common law that provides an entitlement to severance pay. You may choose to modify your response above, or you may find the following resource useful to you:

Please complete our survey.

Employment Standards Information Centre
416-326-7160 (Greater Toronto Area) 
1-800-531-5551 (toll free Canada-wide) 
1-866-567-8893 (TTY for hearing impaired)