Severance Pay in Ontario — Is Your Offer Fair?
Ontario employers often offer only ESA minimums. Your common law entitlement may be significantly higher. Get a free package review before you sign.
Two Types of Severance Pay in Ontario
Ontario law recognizes two distinct types of severance entitlement. The first is statutory severance under the ESA: this applies only to employees who have worked for the same employer for at least 5 years AND whose employer has an annual payroll of $2.5 million or more (or the employee's position was eliminated because of a closure or a mass layoff). ESA severance is calculated at one week of regular wages per year of service, capped at 26 weeks. The second type is common law reasonable notice — determined by Ontario courts based on the Bardal factors: your age, length of service, the character of your employment, and the availability of similar work. This is separate from and often significantly higher than statutory severance. Many employees entitled to both receive only the ESA amount from their employer. Understanding which entitlements apply to your situation is the critical first step.
Factors That Affect Your Severance Entitlement
When assessing common law reasonable notice, Ontario courts weigh several interconnected factors. Age matters — older employees typically receive longer notice periods because re-employment can be harder. Length of service is critical — the longer you worked for your employer, the greater your entitlement, and some courts recognize "15-month caps" as a starting point while frequently awarding more. The character of your position matters — managerial, professional, and specialized roles tend to attract longer notice periods. Availability of comparable employment is assessed objectively: if your specialized skills are in high demand, notice may be shorter; if you are in a niche role in a declining industry, it may be longer. Inducement is also relevant — if your employer convinced you to leave stable employment to join them, courts may increase your notice period to account for this. Finally, the presence or absence of a valid termination clause in your employment contract can fundamentally alter what you are entitled to.
What to Look for in a Severance Package
A severance package is more than a lump sum — it is a bundle of obligations and rights. Evaluate each component: the base pay (is it at your full regular earnings, including bonuses and commissions?), the benefits continuation (are your health and dental benefits maintained through the notice period?), the treatment of stock options or profit-sharing, and the outplacement services offered. Pay close attention to the release you are asked to sign — it typically releases your employer from all claims, including human rights claims and wrongful dismissal claims. Understand whether the offer is adequate before signing. Our Licensed Paralegal (Law Society of Ontario) can provide a general assessment of your package. Where claims exceed $50,000, we assess your entitlements and connect you with the appropriate professional.
- Your contract's termination clause has been reviewed for enforceability
- The offer includes at least the ESA statutory minimum for your years of service
- Bonuses, commissions, and incentives are factored into your severance calculation
- Benefits continuation is specified in writing
- You understand what claims you are releasing