Severance pay refers to an amount of money that an employee gets from an employer when the contract is terminated earlier than it was initially supposed. When an employee loses his job although he had a long-term contract, he can get paid to compensate the loss.
Severance occurs when a company where the employee works goes bankrupt and the employer has to dismiss the employee. When the employee is laid off by the employer for period of 35 weeks or more, it also refers to severance. In some cases of constructive dismissal, for example when an employer extorts the employee, or changes working conditions so an employer is forced to quit his job, etc. an employee can fight to get a severance pay.
Is severance pay mandatory in Ontario
In Ontario, if an employee has worked in a company for five or more years and an employer has at least $2.5 million of payroll, he or she is qualified for severance pay. Also, an employee is qualified for a severance pay when the employer severes 50 or more employees during a period of six months. To learn what severance pay to expect from an employer, review an employment contract to see the salary details and terms of dismissal.
How do you figure out the amount severance pay
There is a way to calculate the amount of money that you will receive from your employer as severance pay. You need to multiply your regular wage for a usual work week by the sum of the total number of years of employment and the number of completed months of employment by 12 for a year that hasn’t been completed yet. However, have in mind that there are some factors that will define how much money you will receive. First, the reason you lost your job and your contract details. Then, it also depends on the number of years you spent working there for your employer.
Exemptions from Severance Pay
You are not entitled to get severance pay if you:
- have turned down a “reasonable alternative employment” offer from the employer
- have rejected “reasonable alternative employment” that is available through a seniority system
- have your employment severed and retire on a full pension recognizing all years of service in the normal course.
- severe your employment because of a permanent closure of the company where you worked that was caused by the economic effects of a strike
- are employed in construction, including off-site working
- are employed in the on-site maintenance of buildings, structures, roads, sewers, pipelines, mains, tunnels or other similar works
- are guilty of disobedience, wilful misconduct or neglect of duty under condition it wasn’t trivial and excused by your employer
- lost your job because the contract of employment was impossible to perform. This doesn’t take into account bankruptcy or insolvency or when the contract is frustrated or impossible to perform as a result of your injury or illness.
Is Severance Pay the Same as Termination Pay
Severance pay is not the same as termination pay, which is given in place of the required notice of termination of employment. Termination pay is an one-time payment that is equal to the amount of money that you would receive for a regular work, during the notice period. You can expect the termination pay to be paid seven days after the contract has been terminated or on the next regular pay date.
Is severance pay in a lump sum
A lump sum is a single, one-time payment as opposed to a number of smaller payments. You can get a severance pay as a lump sum payment, a salary continuance or deferred payments which means you will be paid out in installments. Fortunately, in some cases, you may be able to choose the payment method, but that depends on your employer.The payment method of severance pay may affect Employment Insurance benefits payment. If you get payment in a lump sum you will pay more tax than in the case where you receive money as a monthly salary. The period of time for which you will get compensated is called severance pay.
Wrongful dismissal is seen as a failure to provide a reasonable severance pay. The rules under the ESA about employment termination or severance have minimum requirements. Some employees may have rights under the common law or other legislation to get bigger rights than termination or severance pay under the ESA. In that case, you as an employee can choose to sue an employer for wrongful dismissal and file a claim for severance pay or termination pay. However, you need to obtain legal advice concerning your employment rights.