The following infographic helps employers and employees determine how much severance pay an employee is entitled to upon a termination without cause:
Wong Employment Presents:
HOW TO CALCULATE SEVERANCE PAY
1. LOOK AT THE EMPLOYMENT CONTRACT
The Contract is Everything
The employment contract signed between an employer and employee is the main factor to determine how much severance is owed upon termination. It is at the beginning of the employment relationship, not the end, that determines how much severance pay is owed
2. LOOK AT THE TERMINATION CLAUSE
The Clause Must Provide at Least the ESA Minimums
If the termination clause does not clearly provide an employee the minimum notice of termination, benefit continuation, and severance pay that is required by the Employment Standards Act, the termination clause will be unenforceable
3. COMMON LAW REASONABLE NOTICE (1)
Common Law Notice is Much More than ESA Minimums
If there is no employment contract, or the termination clause is unenforceable, employees will be entitled to reasonable notice of termination, or pay in lieu of notice. How much depends on the employee’s age, length of service, character of employment, and availability of similar employment.
4. COMMON LAW REASONABLE NOTICE (2)
One Month Pay Per Year of Service
Courts used to give around one month of pay per year of service as severance for common law reasonable notice. While that is old law, it can sometimes be used as a rough estimate. The goal of severance in these cases is to determine how long it will take an employee to find comparable employment.
Jason Wong is a Toronto employment lawyer. He works with employees and employers regarding all aspects of workplace law, inclkuding employee terminations and severance. You can reach him at 647-242-5961 or firstname.lastname@example.org