What is statutory severance pay under the Ontario Employment Standards Act?
Briefly, statutory severance pay for eligible employees is required to be paid in addition to termination pay or any other payments to which the employee is entitled. It is paid to empoyees whose employment has been severed to recognize loss of seniority and job-related benefits. It also recognizes an employee’s long service.
An employee qualifies for statutory severance pay when the employment is severed and the employee:
- has worked for the employer for five or more years (including all the time spent by the employee in employment with the same employer, whether continuous or not and whether active or not),
- the employer: has a payroll in Ontario of at least $2.5 million;orsevered the employment of 50 or more employees in a six-month period because all or part of the business closed
How to calculate statutory severance pay?
The maximum amount of statutory severance an employer is required to pay under Employment Standards is 26 week. To calculate the amount of statutory severance pay an employee is entitled to receive, the employer must multiply the employee’s regular wages for a regular workweek by the sum of:
- the number of completed years of employment;
- the number of completed months of employment divided by 12 for a year that is not completed.
Tool to help with calculation
The Ministry of Labour online severance tool will make this process much easier. It will take the user through a number of steps, including determining whether the employment relationship has been severed, understanding entitlement to service, and employer exemptions to severance pay. Once it’s been determined whether the employer owes severance, the severance calculator will determine the amount of severance pay that is owing.
To better help employers comply with their obligations under the Employment Standards Act, the Ministry of Labour already has a Public Holiday Pay Calculator available on their website and is working on additional tools such as: a Termination of Employment Tool; a Temporary-Lay-off Tool and Employer workbook.
The tools can be found at www.labour.gov.on.ca/english/es/tools/index.php
Human Resources and Compliance Managing Editor
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