A Complete Overview of Severance Pay

Losing your job can be emotionally and financially challenging. As you begin to figure out your next steps, you may be entitled to certain financial protections from your former employer. One of these is termination pay, which compensates for losing your position. In some cases, employees are also eligible for severance pay—a financial buffer that can help support you while you search for new employment. Understanding your rights and seeking legal advice can make a significant difference in securing the compensation you deserve.

Who Qualifies for Severance Pay?

Not every employee is automatically entitled to severance pay. To qualify, you must have worked for your employer for five years or more. This includes any previous periods of employment with the same company, even if they were not continuous or full-time.

However, eligibility also depends on your employer’s circumstances. They must either:

• Have a total payroll of at least $2.5 million in Ontario, or
• Have terminated 50 or more employees within a six-month period due to a permanent or partial business closure.

If these conditions are met, you may be entitled to a severance package, which often includes both termination and severance pay. The amount is typically based on the length of your service with the company.

Is Severance Negotiable?

Yes — severance packages are often open to negotiation. Before accepting an offer, it’s important to understand what you’re being offered and how it compares to what you’re legally entitled to. Consulting with an employment lawyer (such as those at HTW Law) can help you assess the fairness of the offer and assist you during negotiations.

When negotiating, consider:

• Your tenure at the company
• The positions you’ve held
• The challenges in finding similar work
• Your contributions to the organization

It’s also essential to keep the three P’s in mind: Power, Personality, and Politics. Communicate with decision-makers, outline your accomplishments, and explain how the termination will affect you personally and financially.

What Can Be Included in a Severance Package?

The primary component of any severance deal is the amount of money you’ll receive, which is usually linked to your years of service. However, payment structure is also negotiable. You may choose:

• Installments, which provide regular income during your job search, or
• A lump-sum payment, offering immediate financial flexibility.

Other negotiable items may include:

• A reference letter highlighting your contributions and skills
• A clause regarding how your employment period will be described to future employers
• Continued benefits coverage for a limited time after termination