What is Termination Pay?
What is Termination Pay? Termination pay refers to a small amount of pay that’s given to an Ontario worker when they are terminated, are let go, or terminated unfairly. This often-used pay is the bare minimum amount set by Ontario’s Employment Standards Act ( ESA). This is also sometimes known as statutory notice or dismissal pay.
Employers and employees both have rights when it comes to what is termination pay. Under theESA, an employee can be given notice up to one year before the termination takes effect. An employee can also receive this same amount of notice in writing, though they must still be employed by the employer for the period of notice. The amount of notice required depends on the employment agreement. In some cases, employers have up to three months to give notice before terminating an employee.
How is this payment calculated? The amount of severance pay is usually equal to the lowest prorated employee rate, which is about two-thirds of their regular rate plus the employer’s portion of premium-based insurance. If the employee receives a notice of dismissal, they are entitled to one week’s notice before being eligible to receive the full minimum amount of severance pay. Once the employment contract ends, an employee cannot legally demand further payment of what is termed “termination pay.”
What is Termination Pay Instead of Notice Pay?
Who gets severance pay? Employees often use this payment to support themselves after losing their jobs. For example, if you’re a health care practitioner who’s had five years of experience with one company and then decides to open a specialty practice in another, you may be eligible for severance pay. Sometimes, individuals choose to sell their entire business so they can afford to make larger payments when their employment is terminated. Still other people may decide to stop working so they can seek better-paying positions.
So how much does an employee receive for receiving this termination pay? Your HR department can provide you with details. Usually severance pay is paid in one lump sum, but companies sometimes allow for installments or commissions, which can make it less expensive for the employee to stop working with them. There are also companies who allow employees to keep the cash paid to them during an “indefinite period” after termination. These companies may specify the date that payments must stop. An employee may not receive severance pay for two weeks after the date that payment was last received if the employee quit their job within two weeks of payment being received.
Some people wonder what is termination pay instead of notice pay. The answer is that it isn’t the same thing. Notice pay describes the financial penalties that your employer imposes for terminating the employee without just cause. Termination pay only provides your employee with the money they are owed for being laid off. You can discuss payment with your human resources manager, an attorney, or a payroll expert.