A 10-year Ontario employee earning $1,200 a week is owed at least $22,200 when terminated without cause: $9,600 in termination pay plus $12,600 in severance pay, and what courts award under common law is often higher still. This free estimator calculates your ESA minimum in under a minute, and nothing you enter is stored or sent anywhere. For the full legal background, see our severance pay guide.
Ontario Severance Pay Estimator 2026
Termination Pay vs Severance Pay: The Confusion That Costs People Money
Ontario has two separate statutory payments, and mixing them up is the most expensive mistake employees make. Termination pay is owed to almost everyone terminated without cause after three months: one week of regular wages per completed year of service, up to 8 weeks. Severance pay is an additional payment for long-service employees: one week per year of service (including partial years), up to 26 weeks, on top of termination pay. One cheque does not cover both. If your employer offered a single number, check that it includes each separately.
Who Qualifies for Statutory Severance Pay
Two tests must both be met:
1. Five or more years of employment. All of your time as an employee counts, including time before a break in service. Partial years count too: 10 years and 6 months gives 10.5 weeks.
2. The employer test. Either the employer’s global payroll is $2.5 million or more (since the Paquette v. Quadraspec decision, worldwide payroll counts, not just Ontario), or 50 or more employees were severed within six months because all or part of the business permanently closed.
Meet both, and severance is mandatory. Miss either, and you are still owed termination pay, just not the severance top-up.
The Formulas, Worked
| Years of Service | Termination Pay (weeks) |
|---|---|
| 3 months to 1 year | 1 |
| 1 to 3 years | 2 |
| 3 to 4 years | 3 |
| 4 to 5 years | 4 |
| 5 to 6 years | 5 |
| 6 to 7 years | 6 |
| 7 to 8 years | 7 |
| 8+ years | 8 (maximum) |
ESA severance pay = regular weekly wages x (years of service + months/12), capped at 26 weeks.
Example: $1,200/week, 10 years and 6 months, qualifying employer. Termination pay: 8 weeks x $1,200 = $9,600. Severance pay: 10.5 x $1,200 = $12,600. Total ESA minimum: $22,200.
Common Law: The Bigger Number Most People Miss
The ESA sets the floor. Ontario courts set a higher ceiling through common law reasonable notice, based on the Bardal factors: your age, length of service, character of employment (seniority and specialization), and availability of similar work. A rough rule of thumb is about one month per year of service, capped around 24 months. For the 10.5-year employee above, that is roughly 8 to 10.5 months of pay ($43,330 to $54,596), far above the $22,200 ESA minimum. Unless a valid contract clause limits you to ESA minimums, this is the number worth asking an employment lawyer about before you sign anything.
Tax on Severance Pay
Severance is employment income and fully taxable. When paid as a lump sum, the employer withholds tax immediately: 10% on amounts up to $5,000, 20% on the slice from $5,000 to $15,000, and 30% above $15,000. This is only withholding; your final tax is settled on your return. One planning note: if you have RRSP room, a direct transfer of some or all of the severance into your RRSP shelters it from immediate tax. Severance is also allocated as earnings for EI purposes, which can delay EI benefits.
What To Do After a Termination: Checklist
1. Do not sign the release yet. Employers often set a signing deadline. You are allowed to take the offer to a lawyer first, and the ESA minimums cannot be signed away.
2. Run the estimator above to learn your ESA floor, then compare it with what was offered.
3. Check your contract for a termination clause. A valid clause can limit you to ESA minimums; an invalid one leaves common law open.
4. Get the number in writing: ask HR to break the offer into termination pay, severance pay, benefits continuation, and any bonus or vacation payout.
5. Mind the tax. Ask whether the payment can be split across calendar years or transferred to your RRSP.
6. Apply for EI on time even if severance delays payment; late applications can cost you weeks of benefits.
Frequently Asked Questions
How is severance pay calculated in Ontario?
Statutory severance is one week of regular wages per year of service (including partial years), up to 26 weeks. You qualify with 5+ years of service and an employer with a $2.5M+ global payroll (or a mass closure). It is paid on top of termination pay (1 week per year, up to 8 weeks).
What is the difference between termination pay and severance pay?
Termination pay compensates for lack of working notice and is owed after 3 months of service. Severance pay compensates long-service employees for the loss of seniority-based benefits and is owed only when the 5-year and payroll tests are met. They are separate amounts under the Employment Standards Act, 2000.
How much severance do I get for 5 years in Ontario?
With a qualifying employer: 5 weeks of termination pay plus 5 weeks of severance pay, so 10 weeks of regular wages as the ESA minimum. Common law may add significantly more.
Is severance pay taxed in Ontario?
Yes, it is employment income. Lump sums are withheld at 10% to $5,000, 20% from $5,000 to $15,000, and 30% above $15,000. Transferring some or all to an RRSP (if you have room) defers the tax.
Does severance affect EI?
Yes. Severance is allocated as earnings over a period after termination, which delays when EI benefits start. Apply for EI immediately anyway; Service Canada does the allocation math.
Can my employer pay severance in instalments?
Yes, but only with your written agreement or the Ministry’s approval, and the schedule cannot run longer than 3 years. If the employer misses a payment, the full balance becomes due immediately.