There seems to be a lot of confusion and misconceptions surrounding “Notice of Termination Pay” and “Severance Pay”, so here are some clarifications.
When an employment relationship ends (no matter how that happens), this is referred to as “severance of employment”. The “Severance Package” is the amount of money, benefits, and other items an employee receives based on how the job ends, and whether or not there is a contract or collective agreement (union) that defines what the employee is entitled to.
If the employee chooses to leave by quitting, resigning, or retiring, (called “voluntary termination”), there is no entitlement to pay for Notice of Termination or Severance, but they may still receive some benefits under an employment agreement.
If the employer chooses to lay off permanently or fire someone (“involuntary termination”), the dismissed person is entitled to a minimum amount of “Notice of Termination” pay under the Employment Standards Act (ESA).
The ESA says that the employer must give at least one week of notice for each year worked, up to a maximum of eight weeks, and if the employment ends before the notice period does, then the employee is entitled to be paid out for the remaining weeks (this is called “pay in lieu of notice”).
Severance Pay is a separate issue under the ESA and may be paid out in addition to Notice of Termination pay. However, in order for an employee to qualify for Severance Pay, the company must have an annual payroll of $2.5 million, and the person must have worked there full time for at least five years or 50 or more people are being terminated at the same time (regardless of the size or payroll capacity of the business).
If an Employer does not offer the required amount of notice pay, they can be subject to a wrongful dismissal lawsuit. Employees are very likely entitled to more “notice pay” under Common Law (court precedents) so be sure to call us for advice on this matter!