Can Severance Pay Ontario Be Based On The Cost Of Living?
Severance Pay Ontario
Losing your job can be a terrifying experience. Whether you saw it coming or were completely blindsided, you’re left to pick up the pieces and figure out where you’ll work next. The experience can also be financially draining. You have to find a new job, cover living expenses and make upcoming debt payments. You may even need to pay taxes on your severance package, depending how it’s structured.
Many employers are required to give employees severance packages if they’re fired without cause or resign with notice. The amount of severance pay an employer must provide is based on the minimums set out in the Employment Standards Act (ESA). These include one week of regular wages per year of service up to a maximum of 26 weeks of severance pay.
In addition to the ESA, common law considerations, such as years of service and your position in the company, play a significant role in determining how much severance pay Ontario you’re entitled to. As a result, severance pay amounts can vary significantly from company to company.
Can Severance Pay Ontario Be Based On The Cost Of Living?
However, these minimums can’t take into account a number of factors such as the cost of living and how long it would take to find a new job. For this reason, you’re often able to claim additional compensation under common law in your severance package.
In Ontario, severance pay is typically based on a person’s salary at their last job. For non-unionized employees, severance pay can be capped at three times the local average monthly salary. This is to help offset any drop in the cost of living that may occur during a person’s search for a new job.
The ESA stipulates that severance pay can be paid in full or in installments, as long as the employee gives consent and the Director of Employment Standards at the Ministry of Labour approves the plan. If your employer fails to follow these rules, you have the option of making a complaint to the Ministry of Labour.
A severance package can be structured to include a lump sum or an installment payment, as well as taxable and non-taxable damages. Taxable damages include the value of lost income, such as the loss of a 401(k) contribution or the loss of life insurance. Non-taxable damages can include a loss of dignity and self-respect, mental distress, and other intangible losses.
If you’re being terminated or considering leaving your job, consult with an experienced employment lawyer. They can assess your circumstances and advise you on the legal minimums under the ESA and the common law, including how much additional common law notice you’re entitled to receive. The lawyers at Walter Law Group can help you determine the total termination, severance and common law notice package you’re legally entitled to. Contact us today to learn more.