19 Jul Reasons Why an Employer is Providing Severance Pay
Statutory severance pay is compensation provided from the employer to a non-unionized employee when they have been dismissed from their employment without cause. The amount of severance pay offered is dependent on how much time the employee has worked for the employer.
According to the Employment Standards Act, the minimum severance pay that must be given to the eligible employee is called statutory severance pay. This minimum payment is equivalent to one week of the employee’s base salary for each year (or partial year) they have been employed. As an employer, statutory severance pay is only mandatory if the employer has a payroll that is greater than $2.5 million per year. Further, these employers are only required to compensate statutory severance pay for those employees who have been employed for five or more years. If the employer or employee does not fit into these parameters, statutory severance pay is not required.
Why has the employee been severed from their employment?
According to section 63 of the Employment Standards Act Policy and Interpretation Manual, the various reasons an employee may be severed form their employment, and thus, qualified to receive severance pay, include:
- the employer does not want to, or cannot, maintain the employment of the employee,
- the employee resigned in response to a constructive dismissal,
- the workplace has been permanently discontinued and the employer is required to terminate the employee,
- the employee was given a 35-week (or more) lay-off period by the employer that needs to be managed within a 52-week period,
- the employee resigned after receiving a termination notice that is activated within their statutory notice period.
Once an employee is severed from their employment, the employer must either provide the compensation within one week after termination or on the next scheduled payday.
If you want to know how much severance pay you should receive, visit our article What is Severance Pay? to learn more.
If you have questions about severance pay or termination packages and how much compensation should be provided to you, please contact KCY at LAW by filling in an online consultation request or contact us by phone at 905-639-0999 to book your consultation.