Ontario employment standards
Termination Pay vs Severance Pay in Ontario
Ontario termination pay replaces required written notice. ESA severance pay is a separate long-service entitlement, and a qualifying employee may be entitled to both.
Quick answer
Termination pay is pay in place of some or all required written notice. Severance pay compensates a qualified long-service employee for losses such as seniority and is not a substitute for notice.
The tests are independent. An employee can qualify for termination notice or pay but not severance, or can qualify for both.
Termination pay and severance pay compared
| Question | Termination notice or pay | ESA severance pay |
|---|---|---|
| What is it for? | Written notice of employment ending, or pay for required notice not worked. | Compensation for losses experienced by a qualified long-service employee. |
| Service gate | Generally three months of continuous employment. | Five or more years of employment. |
| Additional employer test | No payroll-size test for the general individual notice rule. | Global payroll of at least $2.5 million, or 50 or more employment severances in six months because all or part of the business permanently closed. |
| Maximum under the general rule | Eight weeks for an individual termination. | Twenty-six weeks. |
| Can both be owed? | Yes. Meeting one test does not replace or prove the other. | |
Termination notice and pay in lieu
In most cases, when an employer ends the employment of an employee who has been continuously employed for at least three months, the employer must provide proper written notice, termination pay, or a combination equal to the required notice period.
Where notice is not worked, termination pay is based on the regular wages the employee would have received during the required notice period. Vacation pay is earned on termination pay, and required benefit-plan contributions must continue through the statutory notice period.
Ontario individual notice schedule
| Period of employment | Required notice |
|---|---|
| Less than one year, after qualifying | 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 or more | 8 weeks |
Mass termination is different
Special rules apply when 50 or more employees at an establishment are terminated within four weeks. The WageWise termination calculator does not estimate mass-termination notice.
Who qualifies for Ontario ESA severance pay?
An employee must have their employment severed, have five or more years of employment, and meet at least one employer condition:
- The employer has a global payroll of at least $2.5 million; or
- The employer severed the employment of 50 or more employees in a six-month period because all or part of the business permanently closed.
For this five-year test, Ontario includes time spent in employment with the employer whether or not it was continuous or active. The factual question of when employment is “severed” can extend beyond a straightforward dismissal.
Severance formula and 26-week cap
Regular wages for a regular work week × (completed years + completed months ÷ 12)The ESA maximum is 26 weeks of regular wages. The statutory termination notice period, whether worked or paid in lieu, is included when measuring completed years and months for severance.
Worked example: two separate estimates
Assume a supported individual termination with no working notice, regular weekly wages of $1,000, and 7 years 4 completed months of employment. Also assume the employee separately passes the ESA severance employer test.
Base termination pay
7 weeks × $1,000
$7,000Vacation pay on termination pay and benefit continuation are separate requirements.
ESA severance estimate
$1,000 × (7 + 4 ÷ 12)
$7,333.33This amount depends on independently meeting the severance eligibility tests.
Do not use this example as proof that both amounts apply to a particular situation. Eligibility, exclusions, notice already provided and the legal wage base must still be confirmed.
ESA minimums may not be the full entitlement
The ESA provides minimum standards. An employment contract, collective agreement, common law or other legislation may provide greater rights. Common-law reasonable notice is not calculated by simply adding a fixed number of weeks to an ESA estimate.
Ontario also warns that an employee cannot pursue a wrongful-dismissal court action and an Employment Standards claim for the same termination or severance entitlement. Legal advice may be appropriate before choosing an enforcement route.
What the WageWise calculators support
The termination calculator supports selected Ontario provincial, employee, individual employer-initiated terminations with full pay in lieu and regular or supported irregular wage information. The severance calculator supports selected cases that pass the five-year and employer tests.
The calculators do not determine constructive dismissal, just cause or wilful misconduct, temporary-layoff disputes, fixed-term exceptions, mass termination, recall-right elections, contractual or common-law damages, instalment schedules, union rights or special-industry exemptions.
Choose the estimator that matches the entitlement
Run the termination and severance checks separately. One result does not establish eligibility for the other.
Frequently asked questions
Are termination pay and severance pay the same?
No. Termination pay replaces required written notice, while ESA severance is a separate entitlement for qualifying long-service employees.
Does five years of service automatically qualify someone for severance pay?
No. The employment must be severed and one of the employer payroll or permanent-closure conditions must also be met.
Can an employee receive both?
Yes, if the independent tests for both entitlements are satisfied.
Is the eight-week notice maximum the same as the severance maximum?
No. The general individual termination-notice schedule reaches eight weeks, while the ESA severance maximum is 26 weeks.
Do the calculators estimate common-law notice?
No. They estimate selected ESA minimums only.
Official sources
- Ontario: Termination of employment
- Ontario: Severance pay
- Ontario ESA Policy and Interpretation Manual: Termination and severance
- Ontario: Industries and jobs with exemptions or special rules
This guide is informational and does not replace the ESA, its regulations or advice about a specific situation. See the calculation methodology and sources policy.