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Do I have to take the severance package offered?

Fired businessman packing personal desk items in box. Stock photo by Getty Images.

The short answer is no. You are under no obligation to take the severance package offered to you unless it is fair and reasonable and meets the requirements under the law of your jurisdiction. You have the option of negotiating the terms of your severance within reasonable limits.

There is a difference between termination and severance pay.

If your employer fails to give you proper notice of termination, it will be required to pay you in lieu of it. This is the idea behind termination pay. Severance is also an amount that gets paid to an employee upon termination, but it is different from termination pay. You may get one or both depending on the length of your employment, the time of the notice, and other factors.

Severance pay is what the employer pays to compensate for your loss of seniority and job-specific skills. It is a way to recognize your years of service. It serves to provide you with a financial cushion while you transition to your next job.

To be eligible for severance pay, you must meet the severance requirements that your province has set out. If you are a federally regulated employee, you must meet the federal standards. In Ontario, the minimum amount of service required for severance eligibility is five years. In Ontario, severance pay is one week’s pay for each year of service up to a maximum of 26 weeks.

Before accepting any severance package, you should read it carefully and see how the employer has come to the number. You should also read your employment contract and collective agreement to see what they say about severance. This way, you can compare and see what is missing from your severance offer if anything.

Don’t sign your severance offer right away. A severance offer usually specifies how much time the employee has to review and consider it. At this point, you want to look at the terms of severance carefully and consult with a lawyer if necessary.

You may also want to inquire about how the severance package will affect your employment insurance eligibility because severance pay is considered income.

If your employer pays you no severance while you are eligible for it or pays you less than you feel is due, you may sue your employer for wrongful dismissal. You will have to go to courts for this.

A number of factors are important in assessing whether your severance package is fair. They include:

  • age
  • tenure and seniority
  • nature of the industry
  • type and location of job performed
  • previous positions
  • availability of similar job opportunities
  • how the courts have decided severance cases in your jurisdiction
  • the terms in the employment contract
  • unclear termination date
  • re-employment offers
  • any working notice
  • promises of secure employment
  • restrictions on future employment (such as non-compete clauses)

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