Ontario severance pay is owed when an employee with five or more years of service has their employment severed and the employer has a global payroll of at least $2.5 million, or severed 50 or more employees in six months because all or part of the business closed. It's one week of regular wages per completed year, plus a fraction for completed months, up to a maximum of 26 weeks, as of October 2026.
Severance pay isn't the same as termination pay. Termination pay is given instead of the notice of termination the Employment Standards Act (ESA) requires; severance pay compensates a long-term employee for losses such as seniority. An employee can be owed both. Everything here comes from the Ontario government's ESA guide, last updated March 18, 2026.
When employment counts as severed
- The employer dismisses or stops employing the employee, including because of the employer's bankruptcy or insolvency.
- The employer constructively dismisses the employee and they resign in response within a reasonable time.
- The employee is laid off for 35 or more weeks in a period of 52 consecutive weeks, or past the end of an extended temporary lay-off the Director of Employment Standards approved.
- The employee is laid off because all of the business at an establishment closes permanently.
- The employer gives written notice of termination and the employee resigns with two weeks' written notice, taking effect during the statutory notice period.
For the lay-off test, a week where the employee earns less than one quarter of their regular weekly wages counts as a week of lay-off. If the constructive dismissal route sounds like your situation, our constructive dismissal guide explains how it works.
The two tests to qualify
| Test | What the ESA requires |
|---|---|
| Service | Five or more years with the employer, counting all time employed, continuous or not and active or not |
| Employer size | A global payroll of at least $2.5 million, or 50 or more employees severed in a six-month period because all or part of the business permanently closed |
The payroll test is global, not Ontario-only, which is why employees of large companies with a small Ontario office can still qualify.
How to calculate severance pay
- Work out regular wages for a regular work week.
- Count the completed years of employment.
- Take the completed months in the unfinished year and divide by 12.
- Add steps 2 and 3 together.
- Multiply step 1 by step 4. The result can't exceed 26 weeks of pay.
The Ontario government's own examples, as of October 2026:
| Employee | Weekly wages | Service counted | Severance pay |
|---|---|---|---|
| Susan, works her 7 weeks' notice | $1,000.00 (40 hours at $25.00) | 7 years, 9 months = 7.75 | $7,750.00 |
| Alex, paid 8 weeks in lieu of notice | $1,000.00 | 10 years + 2 months = 10.17 | $10,170.00 |
| Kwesi, paid by commission | $643.58 (average of last 12 weeks) | 9 years, 6 months = 9.5 | $6,114.01 |
Alex's example holds the insight people miss: notice weeks count towards service whether they're worked or paid in lieu. Alex's 8 weeks of pay in lieu became 2 extra months of service in the calculation. For commission earners like Kwesi, regular wages are the average of what they received in the weeks worked during the last 12 weeks.
Resigning after notice without losing severance
An employee who's been given written notice can resign and keep severance pay, as long as they give two weeks' written notice and the resignation takes effect during the statutory notice period. If the employer gives more notice than the ESA requires, the statutory part is the last part. The ESA guide's example: Heather is owed 7 weeks' notice after seven years, gets 10 weeks, and keeps her severance pay as long as her resignation lands in the last 7 weeks.
When severance pay must be paid
Severance pay is due seven days after employment is severed or on what would have been the next regular pay day, whichever is later. An employer can pay in installments with the employee's written or electronic agreement or the Director's approval, but the plan can't run more than three years, and one missed payment makes the whole amount due immediately.
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Who isn't entitled to severance pay
- Employees who refuse an offer of reasonable alternative employment, including through a seniority system.
- Employees who retire on a full pension recognising all years of service they'd normally have worked. Canada Pension Plan benefits don't count.
- Closures the employer can show were caused by the economic effects of a strike.
- Construction employees and employees doing on-site maintenance of buildings, roads, sewers, pipelines and similar works.
- Employees guilty of wilful misconduct, disobedience or wilful neglect of duty that isn't trivial and wasn't condoned.
- Contracts frustrated or impossible to perform because of an unforeseen event, but not bankruptcy, insolvency, or an employee's own injury or illness.
ESA severance or a wrongful dismissal claim?
The ESA rules are minimums, and some employees have greater rights under common law. The catch: you can't sue for wrongful dismissal and also file an ESA claim for termination or severance pay for the same job loss. You have to choose one, so get legal advice before filing anything. Our guide to the Ontario Employment Standards Act covers the other minimums, including vacation pay owed on termination.
The verdict
Check the two tests first: five years and a $2.5 million global payroll. If both are met, the maths is simple, but count notice weeks and partial months, because that's where employers underpay. And if you might have a bigger common law claim, decide before you file with the ministry, not after.
Frequently asked questions
Who qualifies for severance pay in Ontario?
Employees with five or more years of service whose employer has a global payroll of at least $2.5 million, or who severed 50 or more employees in six months due to a closure.
How much severance pay do you get in Ontario?
One week of regular wages per completed year plus completed months divided by 12, up to a maximum of 26 weeks.
Is severance pay the same as termination pay?
No. Termination pay replaces notice; severance pay compensates long-term employees for losses such as seniority. Some employees get both.
When does an employer have to pay severance in Ontario?
Seven days after employment is severed or on the next regular pay day, whichever is later.
