How is Severance Pay Calculated? Calculating Severance Pay in Canada

SeverEase
Nov 17
3 min read

Updated: Nov 22

Losing a job without cause can be unsettling. You may be wondering: How is severance pay calculated?

One of the first things you want to understand is how much severance pay you might be entitled to. Knowing this helps you plan your next steps with confidence.

In this article, we walk you through the basics of calculating severance pay in Canada. You’ll find clear explanations, practical tips, and resources to help you get the fair package you deserve.

Severance Payment Calculation Guide: What You Need to Know

Severance pay is money your employer may owe you when your job ends without cause. It’s meant to help you during the transition to your next opportunity.

There are two sources of severance pay:

Severance pay in accordance with employment standards legislation
Severance pay under the common law

Employment standards legislation sets out the bare minimum requirements for notice that employers must provide employees. However, many employees are entitled to more notice than their statutory minimums. This is commonly referred to as "common law notice." Common law notice is judge-made law that looks at an employee's age, position, length of service, and job market to estimate how long it might take for them to find new employment.

To get an estimate of your severance pay entitlement under the common law, you can use a severance pay calculator canada. This tool helps you input your details and see what you might expect.

Eye-level view of a calculator and a notepad on a wooden desk

How is Severance Pay Calculated?

Let’s break down the calculation into clear steps:

Determine your regular wages
This usually means your base salary or hourly wage multiplied by the hours you normally work. Include bonuses or commissions if they are part of your regular pay.
Calculate your length of service
Count the total time you worked for your employer. This is often in years but can include months.
Review your employment contract
Sometimes, contracts offer better severance terms than the law requires.
Examine your statutory entitlements
Review your provincial employment standards legislation to determine your minimum statutory entitlements to termination notice or pay in lieu.
Estimate your common law severance pay entitlements
Use the SeverEase severance calculator to determine your minimum statutory entitlements to termination notice or pay in lieu.

What is the Average Severance Package in Canada?

Understanding the average severance package can help you know what to expect. While it varies widely, here are some typical figures:

Statutory Entitlements: 1 to 2 weeks of pay per year of service
Common Law Entitlement: 1 to 2 months per year of service

Close-up view of a contract document with a pen on a wooden table

Tips to Maximize Your Severance Pay

You want to make sure you get the best possible severance package. Here are some tips:

Know your rights: Research your province’s employment standards. This gives you a baseline.
Review your contract: Look for any clauses about severance or termination.
Use a severance pay calculator to estimate your common law entitlements.
Negotiate respectfully: Employers may be willing to offer more if you ask calmly and clearly.
Keep records: Save emails, contracts, and pay stubs.

Negotiating severance can feel intimidating, but being informed puts you in control. For further information, check out our article: What Makes a Severance Package ‘Fair’? A Lawyer’s Checklist.

Remember, your goal is a fair deal that supports your next chapter.

What to Do After You Calculate Your Severance Pay

Once you have an idea of your severance pay, here’s what to do next:

Compare your estimate with the offer: Does it match or fall short?
Ask questions: If something is unclear, request a detailed explanation.
Get everything in writing: Never accept verbal agreements alone.
Look for support: Online resources like SeverEase can help with your job search.