In Ontario, termination pay is money paid instead of working notice when your job ends, while severance pay is extra compensation some longer‑service employees receive when the employment relationship ends. Understanding the difference helps you judge whether your total termination pay and severance package is fair under Canadian law.

Many people use termination pay and severance pay as if they are the same thing, but the law treats them as two separate entitlements. In Ontario, both are set out in the Employment Standards Act (ESA), and you may also have extra rights to more pay under the common law and your employment contract.

This article explains severance pay vs termination pay in Ontario, how each is calculated, and how to tell if your severance package is complete.

What Is Severance Pay?

In Ontario, severance pay is extra money that some employees receive when their job ends, usually because they have worked for their employer for many years and the loss of the job will seriously affect them. Not all provinces use the term the same way, but the idea of a severance package exists across the country.

Under the ESA, severance pay in Ontario is usually owed if:

• You have at least 5 years of continuous employment with the same employer; and

• Your employer has a payroll of at least $2.5 million in Ontario or has permanently laid off 50+ employees within 6 months due to all or part of the business closing.

ESA severance entitlements are generally calculated as:

• One week of regular wages per year of service (plus partial years), up to a maximum of 26 weeks of pay.

On top of this, common law can sometimes increase your total severance package, especially after a wrongful dismissal where the employer did not provide enough overall notice or pay.

What Is Termination Pay?

Termination pay is money your employer pays you when your job ends and you do not work through some or all of the notice of termination you are owed. Instead of giving you working notice, your employer may send you home and pay your wages (and usually continue benefits) for that time.

Under the ESA, termination pay covers at least the minimum notice period you should have received:

After 3 months of service, notice starts at 1 week and generally increases by about 1 week per completed year of service, up to 8 weeks.

This ESA notice is only the minimum. The common law often gives employees a much longer reasonable notice period, especially for older workers, long service, or specialized roles. If you only receive ESA termination pay, your total package may be too low.

Is Termination Pay the Same as Severance Pay?

No. Termination pay and severance are not the same, even though both may appear in your final severance package.

• Termination pay: Minimum pay in place of working notice when your job ends.

• Severance pay: Extra pay some longer‑service employees receive, often when they meet specific rules about years of service and employer size.

You can receive:

• Termination pay alone;

• Severance pay alone (in rare cases where notice was worked but the ESA severance rules still apply); or

• Both termination pay and severance if you meet the ESA requirements.

In Ontario, the law separates these two clearly. Other provinces use different language but still have rules that act like extra severance or enhanced notice for certain employees.

Your employment contract and any termination clause might also try to limit what you receive, but if those terms do not meet ESA employment standards, courts can ignore them and apply common law instead.

What Is the Difference Between Termination Pay and Severance Pay?

Here is a simple chart to highlight the key differences between termination pay vs severance pay Ontario.

Key Differences: Termination Pay vs Severance Pay Ontario

Because of these differences, calculating severance pay and total entitlements is not always simple. A short offer that only covers ESA minimums may fall far below what common law would provide.

Sarah’s Story

Sarah is a 52‑year‑old office administrator in Timmins, Ontario. She has worked for a national company for 11 years when she is told that her position is being eliminated in a reorganization. Her termination letter offers:

• 8 weeks of termination pay, and

• A lump‑sum severance pay amount that seems small compared to her long service.

Sarah is not sure if the offer is fair.

1. How termination pay works for Sarah

   • Ontario’s ESA law sets a minimum notice of termination or termination pay based on her years of service.

   • The 8 weeks is meant to cover that minimum period. However, under Canadian common law, someone in her position (older, long service, administrative role, limited local job market) might be owed many months of reasonable notice.

2. How severance pay works for Sarah

   • Her severance pay is based on a formula, recognizing her 11 years of continuous employment.

   • If the company operates across Canada and has a large payroll, her severance entitlements may be higher than the small lump sum she was offered, especially once common law notice is considered.

3. What Sarah should do

   • She should avoid signing the severance package right away. Once she signs a release, she may give up her right to claim additional termination pay and severance.

   • A conversation with an employment lawyer can help her review her employment contract, check any termination clause, compare her offer to local employment standards, and estimate her common law notice range.

In short, minimum standards plus common law rights often mean you are owed more than the first offer suggests.

Practical Checklist: Have You Received Full Termination and Severance Pay?

Use this checklist to decide if you should get advice before accepting a package.

Termination Pay

• Have you worked at least 3 months for your employer?

• Did your employer end your job without giving you full working notice of termination?

• Did you receive termination pay that covers at least the ESA minimum weeks for your years of service?

• Were your benefits continued for the notice period, or paid out appropriately?

Severance Pay and Common Law

• Have you worked 5+ years of continuous employment with the same employer?

• Does your employer seem large (often meeting the ESA payroll test), or were many people let go at once?

• Did your offer clearly separate termination pay and severance pay, and explain how each was calculated?

• Have you checked whether a termination clause in your employment contract tries to limit your rights below ESA employment standards?

• Have you spoken with an employment lawyer about whether common law would entitle you to many more months of pay than what is being offered?

If you answered “no” or “I’m not sure” to several of these questions, your termination pay and severance package may be too low. You may want to consult an employment lawyer to be sure you are receiving what you are entitled to.

Consult Our Legal Professionals for Advice

Sorting out termination pay vs severance pay in Ontario is confusing, especially when you are already worried about your income and your family. There is often a big gap between what the ESA requires and what common law notice can provide after a wrongful dismissal or an unfairly small offer.

Share Lawyers can review your severance package, look at your employment contract, and explain how termination pay and severance should be calculated in your situation.

Speaking with an employment lawyer before signing anything can make the difference between accepting bare ESA minimums and securing the full severance pay the law says you deserve. Contact our employment lawyers today. There are no fees unless you win your case.