Severance pay refers to a sum paid by an employer to an employee whose employment is ending, typically in the context of an individual or collective layoff. It may serve as a replacement for notice, compensation for job loss, or result from a mutually agreed separation.
This payment is distinct from regular salary or vacation pay—it is specifically linked to the end of the employment relationship.
Severance pay may be provided in situations such as:
It is not always mandatory under the Act Respecting Labour Standards, except when replacing a legally required notice.
The amount varies depending on several factors:
Some employers follow guidelines (e.g., one week per year of service), but this is not a universal rule.
| Term | Purpose |
|---|---|
| Notice Pay | Replaces the minimum legal notice required |
| Severance Pay | Voluntary or negotiated compensation, often higher than minimum notice |
It is common for both to be combined into a single payment.
Severance pay is taxable in Québec and Canada. It may:
A tax advisor can help optimize how it is treated.
In many cases, severance pay is offered in exchange for signing a release. . This agreement prevents the employee from making future claims against the employer.
Severance pay refers to compensation paid to an employee at the end of employment—whether to replace notice, as recognition, or as part of a settlement. It is variable, taxable, and often formalized through an agreement. Understanding it properly helps both parties manage employment separation with respect.
Important Notice - The information presented in this article is provided for general informational purposes only. It does not constitute legal advice or personalized professional guidance. Each termination or employment situation may involve specific circumstances. We recommend consulting a lawyer, legal advisor, or qualified HR professional before making any decision.