Severance pay is a key component of employee packages that can be used as a financial safety net for laid-off employees as they search for new positions. However, it is a complex topic and many employers misunderstand the requirements and obligations surrounding it. This article explores the basics of severance pay and offers some tips for maximizing its value.
The minimum statutory severance pay Ontario that an employer must provide to an employee is one week of regular wages for each completed year of employment, plus 1/12 of a week of regular wages for each additional completed month of employment. This amount may be paid in a lump sum or in installments. It is also possible for an employer to negotiate higher levels of severance pay, which are often dependent upon the length of employment and the salary level of the employee.
Often, the terms of an employment contract will stipulate that the employer is obligated to provide a certain level of severance pay upon termination of employment. An employment lawyer can assist an employee in determining what their legal entitlements are and what they are best positioned to negotiate with their employer.
In addition to the minimum severance pay set out in the ESA, common law considerations can result in a severance package that is more generous than what is legally mandated. Some of these factors include the length of employment, salary level, and age of the employee, all of which are used to determine what is considered a fair offer.
An experienced employment lawyer can help an employee understand what the minimum severance pay ontario they are entitled to is and ensure that it is not being withheld. They can also review any provisions of an employment contract that may restrict their ESA entitlements.
Some employers will attempt to use a poorly-drafted termination clause in an employment contract to limit the minimum severance pay ontario that they are obligated to provide. This can be a significant issue, and it is important that all employment contracts are properly worded to ensure that they are legally enforceable.
While it is not always possible to avoid firing an employee, the laws in Ontario make it illegal for employers to fire employees based on discriminatory reasons. When the law is violated, employees can sue for wrongful dismissal, and they can be awarded compensation to cover lost earnings and damage to their reputation. It is also important for employers to be aware of the laws and to follow them in order to protect their employees. It is not uncommon for severance packages to include compensation for these types of damages.
