How is severance pay handled in Canada?

Severance pay is often paid to employees in conjunction with the notice period or payment in lieu. Severance pay is calculated according to the employee’s length of service. Terminating employees receive severance equal to two days of pay for each full year of employment, with a minimum of five days’ pay. Only employees who have completed a minimum of 12 consecutive months of continuous employment are entitled to severance. 


Instances where employers are not required to pay severance include the following scenarios: 


  • Layoffs not resulting in termination, for example, furlough 
  • At the end of an employee’s pre-determined contract end date 
  • Dismissal for just cause 
  • Employee resignation 


If you have questions about terminating employment contracts in Canada, please get in touch with our team today! 

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