Severance Pay Calculator

Disclaimer: This severance pay calculator does not constitute legal advice, and the results provide no guarantee of your entitlements. Consult with an employment lawyer to seek legal advice about your specific situation.

How the severance pay calculator works

Our severance pay calculator allows you to estimate your “notice period” or “pay in lieu of notice” (called severance pay) at common law.  It is not legal advice.  It is just a reference tool.

Introduction

In a nutshell, if the employer doesn’t give you a proper “notice period” (meaning they did not give you enough advance notice of the end of your employment), then they have to provide you with “severance pay” instead of that notice.

How much common law notice or severance pay you are entitled to comes down to “the Bardal factors” named after a legal case in the 1960s called Bardal v. Globe & Mail Ltd., 1960 CanLII 294 (ON SC)

The Bardal factors are:

• Character of the employment
• Length of service
• Age
• Availability of similar employment, having regard to the experience, training and qualifications of the employee

Important: Since Bardal, our courts have considered many more factors to calculate severance pay – but the Bardal factors are the main ones.

Our severance pay calculator uses the first three of the four Bardal Factors, because it would be impossible to design a severance pay calculator to deal with all of the factors.  So, it provides a reasonable approximation of your potential severance entitlements, but you should consult an experienced wrongful dismissal lawyer to know for sure.

Our severance pay calculator was designed with reference to over 3,000 wrongful dismissal cases decided over the last 40 years, from across Canada.

When does the severance pay calculator NOT apply?

The severance pay calculator does not apply where:

• The employee resigns their employment (without good reason).
• The employment relationship is frustrated by an unforeseen circumstance.
• The employee is terminated for “just cause” (but only if just cause is proven).
• The employment contract ends at the expiry of a fixed term (i.e., you have a fixed-term contract).
• The employment contract contains a valid term providing for the amount of notice given in the event of termination (caution: many contracts are drafted poorly and don’t limit you.

Important: Always discuss your potential wrongful dismissal matter with an experienced employment lawyer.

Why is the “character of my employment” an essential factor in calculating severance pay?

Generally speaking, jobs that are managerial or specialized tend to attract higher notice periods, so a common law severance pay calculator like ours will tend to show greater severance pay amounts for those positions.

Why is my “age” an important factor in calculating severance pay?

For the most part, the older you are at the age of termination, the more weight will likely be given to your age as a factor in considering your notice period. The basic rationale is that the older you get, the more difficulty you will have in finding re-employment because you will be competing against younger, cheaper workers. Our severance pay calculator takes this into account.

Why is my “length of service” an important factor in calculating severance pay?

An employee’s length of service is an important factor in calculating severance pay. For one thing, it has been said by our courts that a long-term employee has a moral claim that has matured into a legal entitlement to a longer notice period.  Other courts have observed that having served one employer for such a lengthy period, a potential new employer may view that individual as “set in his ways” and not as adaptable to change.  Whatever the reason, courts have considered long-term service as a factor in increasing the notice period.  In our severance pay calculator, we consider a variety of service lengths to estimate an employee’s entitlements.

Importantly, short service does not preclude long notice periods if the following are present: high compensation, important levels of responsibility, inducement, poor re-employment prospects or specialized skills.

Why other factors that can increase my notice period/severance pay?

When calculating severance pay, the law can consider a variety of other factors (in addition to age, length of service, and job type), including:

The availability of similar jobs in the marketplace

If it can be demonstrated that few comparable jobs are available to you, you would be entitled to greater severance.  Conversely, if there are a lot of jobs available to you, your severance pay would likely be less.

You were induced to leave secure employment

If you were induced to leave secure employment to join a new company, and then you were terminated not long afterward, you might be entitled to a longer-than-normal notice period. In one case, the court suggested that it would double the amount of severance pay.

You were a specialist

If your job entails a specialized skill set, there are likely fewer employment opportunities available to you, and therefore, you ought to be entitled to greater severance.

You have limited formal education and skills

You are at a disadvantage if you lack formal education, certifications, or other training.  Re-employment will likely take you longer to achieve, and therefore, you should receive greater severance pay.

You are in poor health

Suppose you are suffering from a disabling condition. In that case, it is generally thought that you will have a more difficult time finding re-employment, and therefore, calculating severance pay will take this into account.

You were terminated during a bad economic climate

If you were terminated during a bad time (either generally or within your industry), your severance pay should be greater.

The manner of dismissal

Courts tend to pay special attention to employers who terminate their employees harshly or insensitively.  It is common for courts to award higher notice periods to employees who have been treated badly.

What should be included in my severance pay?

Generally speaking, if you are entitled to (for example) six months’ notice or severance, then you should be entitled to all compensation you would have earned had you worked those six months.

Unless there is clear, contractual language to the contrary, the calculation of your severance should include everything of value, which might include:

Base salary

This is straightforward: Base salary is the baseline salary you earn annually.  Then, we divide into “months” or “weeks” to calculate severance pay.

Occasionally, we have to estimate annual earnings based on an hourly rate.  A neat trick is to multiply the hourly rate by the number of hours in the year.  If it’s a 40-hour work week, the magic number is 2088.

Commissions

In the absence of contractual language to the contrary, you are generally entitled to be paid the commissions you would have earned if you had been given reasonable notice.

For example, say you earn $2,000 per month in commissions. If you are terminated and you ought to be entitled to 5 months’ notice or pay in lieu (according to the common law), you should get $10,000 of commissions as part of your severance package.

Bonus

In the absence of contractual language, you are generally entitled to be paid the bonus you would have earned if you were given reasonable notice or pay in lieu.

This is often hotly contested by the employer. They rarely want to give out bonuses after an employee is terminated.  But, you could be leaving a lot of money on the table if you don’t pursue it.

Benefits

Today, benefits are more important than ever, given the cost of medical treatment, dental services, and various insurance products like life insurance, long-term disability insurance, critical illness insurance, etc.

If you’ve tried the severance pay calculator and it says, for example, you might be entitled to 8 to 10 months of notice or pay in lieu, then you should also be entitled to benefits for the same 8 to 10-month period.

For the most part, basic group health and dental coverage can be “continued” during the notice period, even if you are not working there anymore.  Otherwise, an employer might provide you money instead (so you can purchase a plan for the open market).

However, benefits are the red-headed stepchild of employment law.  Not all benefits are treated equally.  There are many pitfalls and landmines for employees and employers alike.

Other 

Your calculation of severance pay might also include:

• RRSP
• pension
• deferred profit-sharing plans
• tuition/relocation reimbursement, etc.
• stock options
• employee discounts
• a promised raise

Does the severance pay calculator measure taxes?

No.

The severance pay calculator is simply an estimate (in months) of how much notice or pay in lieu (“severance pay”) you might be entitled to.

But, with limited exceptions, any employment income you earn (including severance pay) is subject to taxes.

Does the severance pay calculator take into account Employment Insurance?

No.

Again, severance pay calculator is simply an estimate of your entitlements (measured in months)

But, with limited exceptions, any Employment Insurance you receive counts against your severance.  In other words, you cannot “double dip”.

What should I do after trying the severance pay calculator?

If you try the severance pay calculator, and you are concerned that your employer did not offer you adequate severance, call us today for a free consultation.

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