Severance pay in Ontario: understanding your package
A severance package may include several payments and conditions. I explain the statutory rules, notice rights and proposed release.
Start with what the payment includes
“Severance” is often used to describe everything an employer offers when a job ends. Statutory severance pay has a narrower meaning in Ontario law. Understanding that distinction helps you assess the offer.
I would ask for a breakdown before judging the total. It may include wages, vacation pay, termination pay and statutory severance pay. There may also be an additional payment in exchange for a release. Benefits, bonuses and commissions may need separate review. Different payments can carry different conditions.
Termination pay and statutory severance are different
Termination pay can replace notice required under the Employment Standards Act. Statutory severance pay is a separate entitlement. It is available only to employees who meet the qualifying conditions.
The statutory severance rules generally require at least five years of employment. The employer must also meet the relevant payroll or business closure conditions. Exceptions and calculation rules matter. The Ontario severance-pay guide explains those requirements. Length of service alone does not settle eligibility.
A package described as a fixed number of weeks may contain several kinds of payment. Ask what each amount represents. The statutory calculation is only one part of the review.
Common-law notice is not a weeks-per-year formula
Common-law reasonable notice may apply to many non-unionized employees. An enforceable contract may limit that entitlement. Relevant factors can include age, length of service, the nature of the employment and the availability of comparable work. The factors are assessed together. There is no automatic weeks-per-year formula.
Review your employment agreement alongside the offer. A termination clause needs its own legal assessment. Payment of statutory minimums does not, by itself, settle common-law notice rights.
Do not simply add two notice calculations together. Statutory payments generally count towards the overall notice-related assessment. They are not automatically added to a full common-law award. Establish the total entitlement and account for what has already been provided.
Compensation can extend beyond base salary
A notice-period assessment may include benefits, bonuses or other incentive compensation. The question includes what would have been received during that period. The plan documents and contract language matter. The Supreme Court’s Matthews v. Ocean Nutrition decision explains why the end of active employment may not exclude incentive compensation.
This does not mean every bonus is payable in every case. Review how it was earned, the relevant dates and the terms governing it. The package’s headline figure may not show whether these issues were considered.
Read the release before deciding
A release can affect your ability to bring further claims. It is not just an administrative form. Other terms may address confidentiality, non-disparagement, cooperation or continuing obligations. Consider the payment and the conditions together.
If you have already signed, seek advice about the wording and circumstances. Do not assume the release has no effect or that it cannot be examined. Before signing, establish what is already due. Then identify the additional offer and the rights you would give up.
Gather the offer, employment agreement, compensation plans, benefits information and proposed release. These provide a better basis for review than a comparison with someone else’s package.
Official sources and further reading
Sources checked on November 2, 2026.
I share these articles for general information. Advice about your circumstances requires an individual assessment.
