Termination Pay in Canada: How Much Should You Get

Losing your job can be an incredibly stressful and challenging experience. As an employee in Canada, it’s important to understand your rights and entitlements when it comes to termination pay. This payment replaces the income you would have received if you continued working during the notice period instead of being immediately dismissed.

What is Termination Pay?

Termination pay is a lump sum payment provided to employees when their employment ends without cause or sufficient notice. It is meant to replace the regular wages the employee would have earned during the statutory notice period outlined in the employment standards legislation.

Instead of providing advance working notice that the employee will be terminated on a future date, the employer can choose to immediately terminate the employee and provide termination pay to compensate for the lack of notice.

In practical terms, termination pay is often referred to as payment “in lieu of notice”; it makes up for not receiving working notice by paying out wages for the applicable notice period.

Who Qualifies for Termination Pay in Canada?

Eligibility for termination pay in Canada depends on several factors, including the employee’s length of service, the reason for termination, and the employment standards legislation that applies to their workplace. Because employment laws vary by province and jurisdiction, there is no single rule that applies to all employees across Canada.

In general, employees may qualify for termination pay if:

• Continuous service: The employee has worked for the same employer for a minimum period of time, as defined by applicable employment standards legislation.
• Termination without cause: The employee’s employment must have been terminated by the employer without just cause. This means there was no serious misconduct, disobedience or neglect of duty by the employee that would warrant immediate termination.
• Not subject to exemptions: Some employees may be excluded from termination pay under certain employment standards rules, depending on their role, industry, or the circumstances of the termination.

If the termination was with cause or the employee falls under an exempt category, they would not qualify for termination pay. Because exemptions and eligibility rules vary, employees should review the employment standards legislation that applies in their province.

How Termination Pay Is Determined in Canada

The specific amount of termination pay an eligible employee is entitled to receive is based primarily on two factors:

1. Their length of continuous service with the employer
2. Their regular weekly wages

Most employment standards frameworks calculate termination pay by linking the employee’s length of service to a required notice period. If the employer does not provide working notice, termination pay is used to compensate the employee for that notice period.

While the specific formulas differ by jurisdiction, termination pay is typically calculated using a structure similar to the following:

Regular weekly earnings × Statutory notice period = Termination pay

The definition of “regular earnings,” how partial years are treated, and whether certain forms of variable compensation are included depend on the applicable employment standards rules. Many jurisdictions also set a maximum statutory notice period, which limits the total amount of termination pay an employee can receive under minimum employment standards.

For example, Jennifer earns $1,500 per week and worked for an employer for 11 years before being terminated without cause.

Her termination pay would be calculated as follows: $1,500 weekly wages x 8 weeks’ notice = $12,000

Although she worked for 11 years, her pay is capped at the maximum of 8 weeks based on the employment standards legislation in her province.

The exact notice or termination pay amount depends on the employment standards in the employee’s specific province or territory.

When Should Termination Pay be Issued?

The timing for when termination pay must be issued is set by employment standards legislation and varies by province, territory, and federal jurisdiction. Employers are required to pay termination pay within the timelines prescribed by the rules that apply to the employee’s workplace.

Below are commonly referenced statutory timelines for major jurisdictions in Canada. These reflect general employment standards requirements and may vary based on individual circumstances.

• British Columbia: According to the British Columbia Employment Standards Act and Regulation, final wages must be paid within 48 hours after the employer terminates the employment, or within six calendar days after the last day of work when an employee quits.
• Ontario: Termination pay must be paid no later than the employee’s next regular payday or within seven days of the termination date, whichever is later.
• Alberta: According to Alberta employment standards rules, employers must pay all final earnings either within 10 consecutive days after the end of the pay period in which termination occurs, or within 31 consecutive days after the last day of employment.
• Federally Regulated Employees: Payment is due within 30 days of the date of termination.
• Other Provinces: Many other jurisdictions, such as Manitoba and Saskatchewan, generally require final pay to be issued within a short statutory period, often tied to the next regular pay cycle or within approximately 10 to 14 days.

In most cases, these deadlines apply to final wages, accrued vacation pay, and statutory termination pay. If an employer fails to meet the applicable deadline, employees may have the right to file a complaint with their provincial or federal labour authority.

Termination Pay vs. Severance Pay: What’s the Difference?

Although they sound similar, termination pay and severance pay are distinct forms of compensation with different purposes and eligibility criteria.

• Termination Pay is available in every province. It is “pay in lieu of notice,” designed to keep you paid while you look for a new job.
• Severance Pay is a specific benefit for long-service employees. Crucially, Statutory Severance Pay only exists in the Federal jurisdiction and Ontario. Other provinces, like BC and Alberta, do not have a separate “severance” statute; they only have termination pay.

Here is how the two statutory entitlements compare:

It is important to note that the chart above covers Statutory Minimums (the bare minimum the government requires).

However, under Common Law (judge-made law), the term “Severance” is often used to describe a “full package” that combines notice and tenure. Common Law entitlements are usually much higher than the statutory minimums listed above, sometimes reaching up to 24 months of pay, and apply in all provinces regardless of the specific “Severance Pay” statutes.

What If I Feel My Termination Pay is Insufficient?

If you believe your termination pay falls short, you may be entitled to more compensation than what your employer has offered. Disputes often arise in the following situations:

• You may be entitled to more weeks of notice or pay based on your length of service.
• The termination pay was issued late and did not meet statutory payment deadlines.
• You were terminated “for cause,” but there was no serious misconduct that would justify losing notice or pay.
• Your employer relied only on minimum statutory entitlements, despite your contract or common law rights providing more.

If you believe your termination pay is incorrect, the following steps may help you assess your options:

• Review your employment contract and applicable provincial, territorial, or federal employment standards.
• Seek a consultation with an employment lawyer to understand whether statutory or common law entitlements apply.
• Raise the issue with your employer in writing and request clarification or correction.
• File a claim with the Ministry of Labour or employment standards authority, where appropriate.
• Attempt to negotiate an improved termination or severance package.
• Consider legal action for wrongful dismissal if the matter cannot be resolved informally.

The first step is to learn whether you were provided your full entitlement. From there, you have options to resolve any deficiencies depending on the circumstances.

Key Takeaways

If you are terminated without cause in Canada, here are six key things to remember:

• You are generally eligible for termination pay after at least three months of continuous service, subject to applicable employment standards rules.
• Termination pay replaces the income you would have earned during the required notice period under employment standards legislation.
• The payment amount is typically based on your length of service and your regular weekly wages.
• Most jurisdictions cap statutory termination pay at a maximum of 8 weeks, regardless of years of service.
• Termination pay is distinct from statutory severance pay, which applies only to certain long-service employees in specific jurisdictions.
• If you believe the amount provided does not reflect your full entitlements, you may have options to challenge or review the termination package.

Losing a job can be very difficult. Understanding your rights and entitlements as an employee can help ease the financial stress. If you have questions or concerns about termination pay, be sure to consult an employment lawyer or the labour authorities in your province.

FAQs