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Everything You Need to Know about Severance Pay in Canada

Severance pay is a type of compensation you receive from your employer, for losing your job. Excluding construction workers, everyone in Canada has the entitlement to receive severance pay, due to the common law severance.

However, there are certain circumstances which disqualify you from receiving compensation from your employer. For example, if your contract talks about termination clause which states that you will receive a type of severance, you cannot claim it under common law severance. Also, do keep in mind that termination pay or pay in lieu of notice is different from severance pay.

When do you qualify for severance pay?

To qualify for severance pay, it is important you meet the following requirements:

  • The employer terminated your employment.
  • You have been working with the said employer for at least five or more years.
  • The employer pays $2.5 million or more as wages.
  • A minimum of 50 people lost their jobs during six months, as a portion or the entire business closed down permanently.

How much severance pay will you get?

According to the Canadian laws, you should get severance pay worth a week’s wages for every year you worked with the employer. The maximum compensation you can receive has a cap of 26 weeks.

The amount you receive as severance pay from the employer depends on several factors. For instance, your age, qualifications, training, experience, character, length of service, and salary play a role in deciding your compensation.

At the same time, there are other criteria, which also come into consideration. For example, if you are going to find it difficult to get similar employment due to lack of university degree in your field, it will become a factor in determining your severance pay. Also, if the employer promised to give you secure and long-term employment, it will be taken into consideration.

Can you get severance pay even if you are employed?

Irrespective of whether you are working under a new employer or not, you will receive severance pay. However, if you do find a job before the settlement, then it will reduce the amount you receive. Due to this reason, it is better to resolve the severance pay, before looking for a new job.

As it is confusing to navigate the world of severance pay in Canada, hiring the services of a lawyer is a great decision. The legal advisor will go through your contract to determine how much compensation you have to receive from the employer!

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