Published on: November 25, 2025
What Is Severance Pay and Are You Eligible?
Severance pay is compensation your employer may owe you when your job ends even if you were let go “without cause.” In Ontario, this goes beyond just your final pay cheque or unused vacation days. You may be legally entitled to severance under both the Employment Standards Act (ESA) and common law, depending on your situation.
You may be eligible if:
- You’ve worked 5 or more years for your employer, and
- The company has a payroll of at least $2.5 million, or
- 50+ employees were terminated in a 6-month period (i.e., mass termination)
ESA severance is separate from termination pay and can add weeks (or months) of income to what you’re owed.
Want to dive deeper into Ontario severance rules? These helpful guides break down specific scenarios:
How Much Severance Are You Really Owed in Ontario? (It’s Often More Than You Think)
Severance vs. Termination Pay: Key Differences Ontario Employees Should Know
Why You Should Never Accept a Severance Package Without Legal Review
Do Short-Term Employees Get Severance in Ontario? What the Law Says
What Are You Legally Entitled to in Ontario?
Under Ontario law, severance pay entitlements depend on multiple factors — and they go beyond just what’s listed in your contract. Here’s a breakdown:
- Minimums under the Employment Standards Act (ESA):
Employees with 5+ years at a company with a $2.5M+ payroll may qualify for up to 26 weeks of severance (in addition to termination pay). - Common Law Entitlements:
Courts often award significantly more than ESA minimums, based on:- Age
- Length of service
- Position and seniority
- Availability of similar work
- Wrongful Dismissal vs. Layoff:
If your termination wasn’t for just cause, and the severance package doesn’t reflect fair notice, you may have grounds for a wrongful dismissal claim.
Many employees mistakenly assume the initial offer is all they’re owed — but it rarely accounts for common law protections.
How Severance Is Calculated: Factors That Matter
Severance isn’t a flat rate it’s assessed based on several personal and employment-specific details. These include:
- Length of Employment:
The longer your tenure, the more notice (or pay in lieu of notice) you may be entitled to. - Age at Termination:
Older employees are often awarded more severance, given the increased difficulty of re-entering the workforce. - Position and Seniority:
Managers and senior professionals may receive longer notice periods due to fewer comparable roles in the market. - Availability of Similar Work:
If your industry is facing downturns or limited opportunities, courts consider this when determining fair compensation.
Courts use these factors under common law to determine what a “reasonable” severance looks like — often far exceeding ESA minimums.
ESA vs. Common Law Severance: What’s the Difference?
In Ontario, many employees don’t realize that severance under the Employment Standards Act (ESA) is just the legal minimum and that most workers are entitled to significantly more under common law.
ESA Severance (Minimum Entitlement)
- Typically 1 week of notice per year of service (up to 8 weeks)
- Severance pay only kicks in if you’ve worked 5+ years and your employer meets certain criteria
Common Law Severance (Full Entitlement)
- Based on court decisions, not just legislation
- Can amount to several months — even up to 24 months — depending on factors like role, age, and market conditions
Employers often offer only ESA amounts unless challenged. That’s why understanding the difference between minimum and full entitlements is crucial before signing anything.
Should You Sign a Severance Offer Right Away?
It’s natural to feel pressured to accept a severance package quickly especially when facing sudden job loss. But doing so without reviewing your full legal entitlements could cost you thousands of dollars in lost compensation.
In many cases, severance offers come with short deadlines, release clauses, or unclear terms. It’s important to understand what you’re being asked to give up and whether the amount offered truly reflects your legal rights.
At Taman Singh Law, we regularly review severance packages to ensure our clients receive everything they’re owed no pressure, no cost surprises. If you’ve been let go or offered a severance agreement, we’re here to help you move forward with clarity.
???? Email: taman@rzcdlaw.com
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About The Author
Taman Singh is an employment lawyer with a focused practice in wrongful and severance negotiations. He is dedicated to advocating for employees and ensuring they receive the compensation they are rightfully owed. With a sharp understanding of Ontario employment law and a results-driven approach,Taman consistently helps clients navigate complex workplace disputes and maximise their severance packages.
