What is ESA Termination Pay

Severance pay calculators are becoming a necessity with the shift in the employment landscape. Despite the term used, employees are let go, discharged, dismissed, fired, laid off and terminated for a host of reasons. The Employment Standards Act confirms a termination as the act of an employer:

  • Dismissing or stopping employment of an employee, including where an employee is no longer employed due to bankruptcy or insolvency of the employer;
  • Constructively dismissing an employee and the employee resigns, in response within a reasonable time;
  • Lays an employee off for a period that is longer than a “temporary layoff”.

These statutes stand as the Ontario ESA representation of employment standards, but the same means with slight deviations are consistent across Canada. For this reason, we will use the ESA as an example throughout this blog when explaining the difficulties of termination pay.

What’s the Difference Between Severance Pay and Termination Pay?

Severance pay and termination pay are different. Severance pay is available in Ontario if you have worked for five years or more with the employer, and if the employer meets certain conditions, such as:

  • Running an annual payroll of at least $2.5 million, or
  • Having permanently closed their business and terminated at least 50 employees over a 6-month period.

Termination pay, instead, is owed to an employee who has been terminated without the specified grace period (working notice). The working notice is intended to give employees an opportunity to search for a new job while still working for a fixed period of time. Instead, the employer ‘pays out’ the employee through termination pay and can let them go on the spot.

Termination Without Cause

In Ontario, an employer can fire an employee without cause at any time, through no fault of the employee. This means an employee does not have to do something wrong to be dismissed. However, employers can ONLY terminate without cause by providing:

  • Advanced written notice, and/or
  • Severance pay

Mass Terminations vs. Regular Terminations

A mass termination in Canada typically involves laying off 50 or more people within a four-week period, while regular termination refers to an individual’s departure from a job.

How to Calculate Severance Pay? The Severance Pay Calculator

Severance pay calculation is based on the employee’s salary and tenure. For example, if Jimmy worked for 5.5 years at $31.25/hour for 40 hours a week, his termination pay would be $6,500.

Introducing Canada’s First Severance Pay Calculator

Now that we’ve covered the basics of termination pay, let’s talk about how PaymentEvolution can make this process smoother for you. Our Offboarding Assistant is designed to help Canadian employers like you navigate the complexities of termination pay.

And that’s right, we built it as Canada’s first severance pay calculator.

Severance pay calculator screenshots. This image shows screenshots from Canada's first offboarding assistant software.

This severance pay calculator uses machine learning to understand the termination process in Canada, along with province-specific rules to calculate the correct and compliant amount of severance pay

Why Choose PaymentEvolution’s Offboarding Assistant?

  • Streamlined Process: Our Offboarding Assistant simplifies the termination process severance pay calculations, ensuring compliance with Canada’s labour laws.
  • Time-Saving: Say goodbye to tedious calculations and legal jargon. Let our severance pay calculator does the heavy lifting for you.
  • Direct Payroll Integration: Tailored to Canadian businesses, our severance pay calculator allows employers to easily add severance pay to their payroll after using the offboarding assistant.

How to use PayEvo’s Severance Pay Calculator

Using Canada’s first offboarding assistant is simple! Check out our tutorial below:

How to Use Canada’s First Offboarding Assistant

Ready to Make Termination Pay a Breeze?

Termination pay doesn’t have to be a headache. With PaymentEvolution’s Offboarding Assistant, you can confidently navigate the termination process, knowing you’re in compliance with Ontario’s laws.

Click here to learn more and take control of your termination process today.

Frequently Asked Questions

What’s the Difference Between Severance Pay and Termination Pay?

Severance pay is specific to long-serving employees in companies with a total annual payroll of $2.5 million or more, while termination pay is given instead of the required notice of termination. Severance pay has additional conditions, such as business closure or mass layoffs.

Can an Employee Be Terminated Without Cause in Ontario?

Yes, an employer can terminate an employee without cause in Ontario. However, they must provide advanced written notice and/or severance pay.

How Does PaymentEvolution’s Offboarding Assistant Work?

Our Offboarding Assistant simplifies the termination process by using machine learning to understand Canadian province-specific rules. It calculates the correct and compliant amount of severance pay and allows for direct payroll integration.

Is the Severance Pay Calculator Exclusive to Ontario?

No, PaymentEvolution’s severance pay calculator is designed for all Canadian provinces, taking into account the specific rules and regulations of each region.

How Quickly Must Termination Pay Be Provided?

Termination pay must be provided within seven days of termination or on the employee’s next regular pay date, whichever is later.

What Happens in the Case of Mass Terminations?

Mass termination involves laying off 50 or more people within a four-week period. Specific rules and procedures must be followed, and PaymentEvolution’s Offboarding Assistant can assist with compliance.

Can I Integrate Severance Pay Directly Into My Payroll?

Yes! Our severance pay calculator allows for direct payroll integration, making the process seamless and efficient for Canadian businesses.

Where Can I Learn More About PaymentEvolution’s Offboarding Assistant?

You can learn more and take control of your termination process by visiting PaymentEvolution’s Offboarding Assistant.


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