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Wrongful Dismissal

What You Need to Know About Severance Pay

Have you recently been fired from your job without cause? Unfortunately, many hard-working Canadians are let go from their jobs through no fault of their own. Whether an employer must downsize due to financial hardship or is changing business goals, losing your source of income is a stressful, challenging event. While your employer may opt to provide you with written working notice, they also have the option to dismiss you immediately with severance pay.

What is Severance Pay?

Severance is the sum of money that your employer is mandated to pay you when you are terminated from your job without cause, meaning through no fault of your own. When this is tied in with compensation for other lost benefits, it is called a severance package.

How Does Severance Pay Work?

Employers must provide severance pay if they decide to dismiss an employee immediately rather than offer appropriate written working notice. If your employer chooses to give you severance, the amount is calculated based on how long you have worked for the company, your position, your age, among other factors. However, you must have worked at the company for more than three months in order to qualify.

The minimum amount of severance per length of employment, as mandated by the Employment Standards Act of British Columbia, is as follows:

  • Three months of consecutive employment = no notice and/or pay
  • Over three months of consecutive employment = one week of notice and/or pay
  • Over one year of consecutive employment = two weeks of notice and/or pay
  • Over three years of consecutive employment = three weeks of notice and/or pay plus an extra week of notice and/or pay after each additional year of employment (up to eight weeks)

It is important to understand that these are the minimum amounts of severance pay and, generally, if your contract of employment does not specifically reference the Act, you may be entitled to considerably greater notice or severance pay.

It’s also important to note that if the business you worked for was sold, leased, or transferred during your time of employment, your length of employment will not be affected unless you were terminated by the selling employer before the business was transferred.

What is Included in Severance Pay?

The actual amount of severance pay that you receive will be based on a few factors. Salary, commission, holiday pay, and paid vacation all contribute. However, overtime is not included.

Is Severance Pay Taxable?

Yes, you will have to pay income tax on severance pay, though just how much depends on how your employer structures the severance.

Will I Need a Lawyer?

If you were wrongfully fired from your position or think that there is a problem with your employer’s severance offer, you may need to take legal action. Meeting with a dedicated, knowledgeable team like Stephens & Holman ensures that you have the best chance possible at getting the compensation that you believe you are entitled to. Please contact our office and we will review your claim in a free consultation.