How to calculate severance pay in Ontario
Severance pay is calculated by multiplying the employee's regular wages for a regular work week by the number of completed years of employment plus completed months divided by 12, to a maximum of 26 weeks.[on_sev]
Ontario's own example. Susan works 40 hours a week at $25.00 an hour, so her regular week is $1,000. On the day her employment is severed she has 7 years, 9 months and 2 weeks of service: 7 + 9/12 = 7.75. Severance pay is $1,000 × 7.75 = $7,750.[on_sev] If hours vary, the regular week is the average of regular wages over the last 12 weeks worked: the guide's example of $643.58 a week and 9.5 years gives $6,114.01. Choose "Weekly amount" in the calculator to enter that average.
Who qualifies for severance pay
An employee qualifies when their employment is severed and both conditions are met: five or more years of employment with the employer (continuous or not, active or not), and an employer with a global payroll of at least $2.5 million, or one that severed 50 or more employees within six months because all or part of the business closed permanently.[on_sev] Employment is "severed" by dismissal, constructive dismissal, a layoff of 35 weeks or more in 52, or a permanent closure.
No severance is owed to employees who refuse reasonable alternative work, retire on a full pension, work in construction or road and building maintenance, or are dismissed for wilful misconduct that is not trivial.[on_sev]
Termination pay and notice
Separately from severance, every employee with at least three months of continuous employment is owed written notice of termination or termination pay instead, from one to eight weeks.[on_term] An employee can be owed both: notice (or pay in lieu) and severance.
| Period of employment | Notice or termination pay |
|---|---|
| 3 months – under 1 year | 1 week |
| 1 – under 3 years | 2 weeks |
| 3 – under 4 years | 3 weeks |
| 4 – under 5 years | 4 weeks |
| 5 – under 6 years | 5 weeks |
| 6 – under 7 years | 6 weeks |
| 7 – under 8 years | 7 weeks |
| 8 years or more | 8 weeks |
Special mass-termination rules, with longer notice, apply when 50 or more employees are let go at one establishment within a four-week period.[on_term] Ontario's example: Sarah, with three and a half years at $20.00 an hour for 40 hours, is owed three weeks' termination pay on an $800 regular week.
Severance and notice for a $1,200 regular week
The table runs the calculator for an employee earning $1,200 a week at an employer that meets the $2.5 million payroll test. Long service hits the 26-week cap at 26 years.
| Service | Notice or termination pay | Severance weeks | Severance pay | Total |
|---|---|---|---|---|
| 5 yr | 5 wk = $6,000.00 | 5 wk | $6,000.00 | $12,000.00 |
| 7 yr 9 mo | 7 wk = $8,400.00 | 7.75 wk | $9,300.00 | $17,700.00 |
| 10 yr | 8 wk = $9,600.00 | 10 wk | $12,000.00 | $21,600.00 |
| 15 yr 6 mo | 8 wk = $9,600.00 | 15.5 wk | $18,600.00 | $28,200.00 |
| 20 yr | 8 wk = $9,600.00 | 20 wk | $24,000.00 | $33,600.00 |
| 30 yr | 8 wk = $9,600.00 | 26 wk | $31,200.00 | $40,800.00 |
Severance pay is due seven days after employment is severed or on the next regular payday, whichever is later; it can be paid in instalments over up to three years only with the employee's agreement or the Director of Employment Standards' approval. No vacation pay is added to severance, but it is added to termination pay; see the vacation pay calculator for Ontario.
Notice and severance are based on regular wages, which for most workers start from the minimum wage in Ontario or above; weekly overtime is not part of a regular week (see the overtime calculator for Ontario).
Frequently asked questions
How much severance pay will I get in Ontario?
Under the ESA, one week of regular pay per completed year of service plus completed months ÷ 12, up to 26 weeks, if you have 5+ years and your employer has a $2.5 million payroll.
Is severance pay the same as termination pay?
No. Termination pay replaces 1 to 8 weeks of notice and applies after 3 months; severance pay compensates long service and applies after 5 years at larger employers. You can receive both.
What is the maximum severance pay in Ontario?
26 weeks of regular wages under the ESA. Common-law reasonable notice can be higher.
Do I get severance if I quit?
Generally no. An exception: if you were given written notice of termination and resign with two weeks' written notice during the statutory notice period, you keep your right to severance.