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What is severance pay?

An employee is paid severance pay as compensation for the loss of a job and is usually paid according to length of service.

Some severance packages are paid to help the employee survive for the period he or she needs to find other employment.

When am I not entitled to severance pay?

If you have been fired due to your own fault, then you may not be entitled to severance pay. This is also known as “just cause.” Just cause means the employer had a good reason to fire you. Often serious misconduct is involved when an employee is dismissed for just cause.

However, the employer has to be careful to terminate for just cause, because if the employee alleges wrongful dismissal it’s up to the employer to prove that there was misconduct or another reason to dismiss.

When does my entitlement to severance pay begin?

Every province and territory has rules in regards to after how much time of service an employee is entitled to severance pay.

Note that federally regulated employers and employees are subject to federal severance pay entitlements, not provincial or territorial.

Usually the person who is being terminated had to have worked at the workplace for a minimum period as outlined in provincial/territorial legislation.

For example, according to federal legislation for federally regulated employees, an employee must have completed at least 12 consecutive months of continuous employment to qualify for severance pay.

However, for many other provinces a few months is all that is required to qualify for severance pay. For example, in British Columbia a worker qualifies for severance pay after three consecutive months of employment. After three months the employee is entitled to one week’s worth of pay.

This three month requirement is shared by some other provinces as well. However, you should check with the appropriate legislation of your province or territory to find out how many months you have to be employed before being entitled to severance.

Is severance pay calculated only according to federal or provincial legislation?

Legislation spells out how much employees’ severance should be but employees are entitled to more severance pay under common law.

Often under common law, severance pay entitlements will also look at the following factors:

  • The employee’s age;
  • The position and responsibilities held by the employee;
  • The length of the employee’s service;
  • The quantum of the employee’s remuneration; and
  • The availability of replacement employment.

That means depending on the above factors, employees are often entitled to more severance pay that what the federal/provincial/territorial legislation has outlined.

Are all employees eligible for severance pay?

There are cases in which an employee may not be eligible. Severance pay sometimes doesn’t apply to employees in certain industries, those that are let go before the qualification period for severance begins, independent contractors and freelancers.

However, the law is always changing and people who didn’t qualify for severance pay in the past may now be eligible.

If you have an issue in regards to severance pay, whether you are eligible for severance pay and/or you believe you haven’t received an appropriate amount in severance pay consult a lawyer.

Read more:

Digest of Benefit Entitlement Principles

What is Just Cause for Dismissal?