Severance Pay

Is severance one week per year of service?

That folk formula describes the statutory layers, not your entitlement. Ontario's ESA gives up to 8 weeks' termination pay plus, for qualifying long-service employees of larger employers, up to 26 weeks' statutory severance. The common-law package on top is measured in months and driven by age, tenure, seniority and the job market — a month per year of service is itself only a rough heuristic that under-compensates older and shorter-service senior employees. Value the specific case, not the proverb.

Do I have to sign the release to get paid?

Not for the statutory minimums — those are unconditional, and withholding them to force a signature is unlawful. The amounts above the floor are genuinely conditional on the release: that is the exchange. Which is exactly why the release deserves review — it typically ends every claim (wrongful dismissal, human rights, unpaid amounts) forever, and occasionally tries to add new obligations on the way out.

They're paying "salary continuance." Is that worse than a lump sum?

Different, with trade-offs. Continuance keeps benefits alive and feels safer, but usually carries a clawback ending or halving payments when you find work — the employer keeps the mitigation upside. A lump sum is certain, clean, and yours regardless of how fast you land, but ends benefits and lands in one tax year. Hybrids exist. Which serves you depends on your market prospects and benefit needs — a negotiable term, not a take-it-or-leave-it.

How is severance taxed — can I shelter any of it?

As income, with planning room. Direct transfers to your RRSP within your contribution room avoid immediate withholding; service before 1996 generates special retiring-allowance transfer room on top; splitting payment across December and January spreads the marginal-rate pain; and legal fees paid to recover employment amounts are generally deductible. None of this happens by default — it is asked for in the settlement mechanics.

I already signed. Is it hopeless?

Usually the release holds — that is its job — but not always. Releases signed under duress, without any consideration beyond statutory minimums, in the face of misrepresentation, or producing unconscionable results have been set aside; and statutory entitlements (ESA amounts, some human rights processes) can survive a badly drafted release. Move quickly: the arguments age poorly. It is a worthwhile C$295 hour even after the ink is dry.