How Does Severance Pay Affect Unemployment Benefits in Alberta?

If you have been terminated in Alberta and are receiving (or may receive) severance pay, you have made the right decision to check how it affects your right to claim unemployment benefits here.

It does affect the income support you receive through the Employment Insurance (EI) program.

While this program provides welcome support for people who lose their jobs and can help them transition back into employment, a severance package will affect the benefits you receive even if you lose your job through no fault of your own.

Either it will preclude you from receiving payments for a while or you may have to pay back “overpayment” benefits you have received if your lump-sum severance package is paid to you after benefits have already begun.

Book Online

Temporary COVID-19 changes to employment insurance in Alberta

Before we get into how your severance package affects unemployment benefits under normal circumstances, we need to recognize that many of us have been in anything but “normal circumstances” in recent times with the COVID-19 pandemic in Canada.

Consequently, there have been some temporary changes introduced by the federal government. These changes were introduced because of the increased number of layoffs during the pandemic and the difficulties in finding new employment that resulted.

Under an interim order from the government, employees can access EI benefits even after receiving a severance package. It states that for any person who was terminated on or after September 27, 2020, any lump sums paid would not impact the individual’s ability to access EI benefits. This does not apply if the severance was paid as salary continuance rather than a lump sum.

These temporary measures last only until September 25, 2021.

How does severance affect unemployment benefits in Alberta?

If you accept a severance package upon termination of employment in Alberta, it will mean:

  • You are not eligible to receive unemployment benefits until the expiry of your severance package (this is usually a specific number of months).
  • If you receive unemployment benefits and subsequently receive a severance package, you will need to reimburse Service Canada for the benefits received during the period covered by your severance pay.

So, either you receive severance pay for your period of unemployment or you receive unemployment benefits. You cannot receive both {“double-dipping”).

How soon after termination should you apply for unemployment benefits in Alberta?

It is best to apply for EI benefits with Service Canada as soon as possible after you are terminated, and certainly within 30 days of losing your job. Otherwise, you may lose the benefits that you are entitled to.

If you are considering a severance package or taking legal advice about your next steps after being terminated, you should still apply for unemployment benefits. You do not need your Record of Employment (ROE) to apply in Alberta, although it is preferable to have it.

It’s better to receive unemployment benefits and pay them back later than to miss the deadline and receive nothing, i.e., apply for EI benefits and deal with the effects of any severance package later.

If I get a severance package, when will I receive EI benefits?

Unemployment benefit payments normally start around 28 days after you apply with Service Canada.

However, if you were paid a severance package and the period it covers has not yet expired AND separately you were approved for unemployment benefits, these payments will start when the severance package period expires.

Why does severance affect unemployment benefits?

If you are paid severance, it is like receiving a weekly wage, i.e., it is considered earnings.

Unemployment benefits are for an “interruption” of earnings and so they start when the severance pay period ends.

What if I don’t receive severance pay immediately after my dismissal?

It is quite common for terminated employees to want to assess their options and seek legal advice before accepting or negotiating a severance package.

So, severance payments may not begin immediately after your employment ends.

This should not affect your decision to apply for unemployment benefits. The clock is ticking after you are terminated and you must make your application with Service Canada within 30 days of your employment ending.

If you are awarded benefits and payments have started and you later settle for a severance package, you should inform Service Canada of the details. You will be notified about repayment of the “overpayment” benefits you have received but interest will not be charged.

Your ex-employer will likely require you to initiate a “notice of debt” with Service Canada before releasing the severance pay and may even agree to deduct the overpayment from the severance package.

Once the severance pay period has ended and there is no longer overlap between the two payments, you are eligible to start receiving unemployment benefits again.

If I am still unemployed after severance pay ends, how long can I receive unemployment benefits?

The total amount of unemployment benefits to which you are entitled is not affected by severance pay – only the timing of the payments.

Ultimately, if you were approved for nine months of EI but for the first six months of unemployment you were covered by your severance package, you may have to pay back some “overpayment” but you can still claim up to nine months of benefits if you cannot find a job and remain eligible in that time.

Of course, in the best-case scenario, you do not require these extra months of unemployment benefits because you have found a great new job during that time – and fortunately, you don’t have to repay your severance when that happens.

Get help with your severance package in Alberta

Employees in Alberta often have to fight for a fair severance package.

The experienced employment lawyers at Taylor Janis are accustomed to assessing severance packages and helping you obtain the maximum settlement.

We can advise you during a confidential 30-minute telephone or video consultation about your severance pay rights.

To arrange a one-on-one consultation and document review with one of our employment lawyers, please contact us today at (780) 428-7770 in Edmonton or (403) 474-0411 in Calgary.

Book Online