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How do I know if my severance pay or termination pay is fair?

Updated: Nov 17, 2020

How do I know if my severance pay or termination pay is fair?

There are a lot of myths, misconceptions, and misinformation when it comes to your employment entitlements in Ontario. There is no greater area of confusion than determining how to calculate severance pay or termination pay when an individual is terminated. As an employment Paralegal, there are many formulas both employees and employers should use when calculating entitlements – one week per year of service, one month per year, and so on.

This is complete nonsense. There is no mathematical formula that dictates severance pay when an individual is dismissed from their employment. Instead, there are a number of factors that, when considered together, determine what the individual is owed. At SAV Paralegal Services, we can help you to navigate this issue.

What Factors Determine Severance?

- Length of Employment

The most commonly cited and misunderstood factor is the length of service an individual has with their employer. Many individuals believe that only those employees with many years of service are owed significantly greater severance packages. This is completely incorrect. In many cases, employees with the shortest service time are provided with comparably higher severance payments.

For example, an employee who is 60 years old, with 30 years of service would be entitled to as much as 24 months’ severance. Whereas that same employee with only 2 years of service would be entitled to as much as 8 months’ severance pay. For that reason, it is very important for all employees to determine exactly what they are owed.

- Age

Typically, older employees are entitled to greater amounts of severance pay. This accounts for the increased difficulties that older workers face when seeking re-employment. That certainly does not mean that a younger worker should not seek out a fair severance package. Too often I speak with young workers who were reluctant to call me due to their age.

While age is a factor, it is only one of many, which can impact the amount of severance you are owed. Every day my firm assists young workers in negotiating significantly increased severance. It is always important to determine what you are owed when dismissed, regardless of age or any other factor.

- Position

Traditionally, senior employees or those employees with specialized skills have been provided with greater amounts of severance. While that is still true in many respects, the playing field has begun to level out in recent years. More and more, severance pay is being increased as a result of the difficulty an individual has in replacing employment and not based only on the position they held with their former employer. As a result, it is more important now than ever to fully assess exactly what you are owed when you are dismissed.

- Availability of Employment

In today’s increasingly challenging and competitive employment market, it is taking individuals longer periods of time to secure employment after they are dismissed. This is one of the most important factors in determining the amount of severance pay owed and applies to individuals of all ages, who are both short and long service employees.

An employee working in a declining industry, such as manufacturing, will not be able to replace their position as quickly as the average person. The purpose of severance pay is to compensate you for the time you are out of a job, so this is a factor an employer must consider in determining what you are owed.

Other Important Factors to Consider for Determining Your Severance Pay

Other factors which will increase the severance pay you are owed:

- Whether you were recruited or induced to accept employment with the employer who has terminated you.

- Whether you are subject to a non-competition or non-solicitation clause that limits your future prospects.

- Whether you are pregnant, ill, or suffer from a medical condition which would make it difficult for you to find work.

- Whether your employer has terminated you for cause which will make it difficult for you to find new employment.

- Whether or not you are owed unpaid overtime (concerning overtime in Ontario)

- Whether COVID-19 downside your industry and therefore you are experiencing a problem finding good work.

If you need help or have further questions, please book your free consultation right here. Our experienced professionals will be happy to assist.

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