Severance Pay vs. Termination Pay in Ontario: Three Separate Entitlements
Most employees are surprised to learn that Ontario law creates three distinct entitlements on termination: ESA termination pay, ESA severance pay, and common law reasonable notice. Understanding all three — and how they interact — is essential to knowing whether what your employer offered is fair.
1. ESA Termination Pay (Minimum Notice)
Under the Employment Standards Act, 2000, most employees are entitled to notice of termination (or pay in lieu) based on years of employment:
| Years of Employment | Minimum Notice |
|---|---|
| Less than 1 year | 1 week |
| 1 year to less than 3 years | 2 weeks |
| 3 years to less than 4 years | 3 weeks |
| 4 years to less than 5 years | 4 weeks |
| 5 years to less than 6 years | 5 weeks |
| 6 years to less than 7 years | 6 weeks |
| 7 years to less than 8 years | 7 weeks |
| 8+ years | 8 weeks (maximum under ESA) |
The 8-week maximum under the ESA is the minimum floor. It is not the amount a court would award. The ESA minimum cannot be contracted out of.
2. ESA Severance Pay (Different from Termination Pay)
ESA severance pay is separate from and in addition to termination pay. It is available to employees who:
- Have at least 5 years of service, AND
- Are terminated by an employer with an annual Ontario payroll of at least $2.5 million, OR are part of a mass termination (50+ employees within a 4-week period)
Calculation: 1 week of regular wages per year of service (pro-rated for partial years), up to a maximum of 26 weeks.
Many employees at large corporations are entitled to both termination pay AND severance pay — and receive only one. This is an extremely common underpayment.
3. Common Law Reasonable Notice
Above and beyond the ESA minimums, Ontario courts award common law reasonable noticebased on the Bardal factors:
- Age of the employee
- Length of service
- Character of employment (seniority, responsibility)
- Availability of similar employment
Courts have awarded between 1 month per year of service (general guideline) up to 24+ months for senior employees. A 10-year mid-level manager aged 55 might receive 18–20 months of common law notice — vs. 8 weeks under the ESA.
How Packages Are Structured
A typical termination package offers:
- Working notice, OR
- Pay in lieu of notice (lump sum or continuation of salary)
- Continuation of benefits during the notice period
- Vacation pay accrued to date
- ESA severance pay (if eligible)
The package is almost always less than what a court would award. Negotiation — backed by a legal opinion — regularly results in improvements of 30–100%.
Terminated? Get a free review of your package before you sign anything.
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