Severance Pay

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Severance Pay in Alberta

If your employment is terminated in Alberta, you have legal rights that are protected under both federal and provincial law. Proper notice and fair severance pay must be given in certain cases. If your employment is terminated, you should speak with an Alberta employment lawyer as soon as possible. The sooner you have advice from your labour lawyer, the better protected your legal rights will be.

What is Severance Pay in Alberta?

Severance pay is compensation an employee receives when the employer terminates his or her employment. The law requires employers to give "reasonable notice" to employees before terminating their employment. This notice is based in part upon the employees' years of service, so it can be up to eight weeks for employees who have worked for the employer for many years.

Rather than have the employee continue to work during this lengthy - and often awkward - notice period, many employers will simply compensate the employee for everything he or she would have earned during the notice period. The Alberta Employment Standards Code and the British Columbia Employment Standards Act both set minimum levels of severance pay. This is based upon years of service and other factors. Many employees, however, are entitled to more severance pay than the minimum standards set forth in these laws. This is why it is so important to meet with a lawyer about your particular situation.

Severance pay is often referred to as a "severance package." This is because a worker is entitled to be compensated for more than just lost wages. Severance can also compensate for commissions, bonuses, pension contributions, RRSP contributions, medical and dental benefits, vacation pay, and stipends for mobile devices, gym memberships, and other fringe benefits.

Example: Today you were notified by your employer that your employment is being terminated, effective immediately. Instead of giving you reasonable notice, your employer has opted to pay you 3 months salary (severance pay).

Is Severance Pay Mandatory in Alberta?

Severance pay is not mandatory in all situations. If an employee is fired for just cause, the employer has no obligation to offer severance pay. "Just cause" is defined as conduct on the part of the employee incompatible with his or her duties, conduct which goes to the root of the contract with the result that the employment relationship is too fractured to expect the employer to provide a second chance.

Employers are also not required to give notice of termination or pay in lieu of notice to seasonal workers, those employed for ninety days or less, or those employed on-site in the construction industry. There are some other exceptions, so again, be sure to consult with a lawyer about your specific circumstances.

Who Qualifies for Severance Pay in Alberta?

Most workers in Alberta will qualify for severance if they:

  • are not dismissed for just cause which can be very difficult for an employer to establish; or,
  • If they resign or quit their position-though they may still be entitled to severance pay if they felt that they had no choice but to resign given the employer’s conduct or lack thereof. Again, these are important questions that you should take the time to run by an employment lawyer.

In these circumstances, and with limited exceptions, employees are entitled to either be given reasonable notice of termination or pay in lieu of notice.

Example: Your employment is terminated after 2.5 years of service. Your employer has offered to give you 2 weeks’ of your regular salary as is required under the Alberta Employment Standards Code. This is a wrongful dismissal. In fact, you are entitled to additional severance pay under what is called the common law.

What is considered fair severance pay in Alberta?

There are many factors that can impact the amount of your severance package. Some of the most common include:

  • Cause of termination
  • Length of time you were employed
  • Employment insurance coverage
  • Your age
  • The nature of the work
  • How long you were unemployed
  • The manner in which you were dismissed

Your severance pay will also depend upon the benefits you received from your employer. Bonuses, commissions, incentive programs, profit sharing, and other types of benefits are all compensable to an employee who is fired without just cause.

Do you get severance if you get fired in British Columbia?

British Columbia has provincial laws regarding severance pay. Like Alberta, these laws require an employer to either give notice of termination or issue severance pay in lieu of notice. Here, too, the amount of pay depends on the length of your employment. At ninety days of employment, the employer must either give one weeks’ notice of termination or pay one weeks’ wages as severance pay. At one year of service, the employee is entitled to two weeks’ notice or pay. Each additional year of service adds an extra week or notice or pay up to a maximum of eight weeks. British Columbia law also provides compensation for the insurance, fringe benefits, and incentive programs the employee would have been entitled to during the notice period.

Important: Most employees are entitled to substantially more than their basic termination pay under the Alberta Employment Standards Code or the Employment Standards Act of B.C. This is known as common law notice or severance. Do not blindly accept minimum pay under the legislation – you are likely entitled to much more.

Paying Taxes on a Severance Package in Alberta

Employees are generally required to pay income tax on any severance package. The amount of taxes you pay will depend on the amount of severance package, and whether you choose to receive it as a lump sum or over time as a deferred salary. It is possible to defer taxes on a severance package by placing it in an eligible retirement or pension fund. Legal fees you spend to obtain your severance package can also be deductible from your taxes.

Taxes vary with each severance package, so it is important to get advice from a tax lawyer or accountant about your particular severance package. Taxes vary from 5 to 30 percent, depending on the amount of the package and the province in which you reside. Be prepared for these taxes to be deducted from a lump sum severance package (as your employer has a legal obligation to withhold and pay taxes). If you are receiving a deferred severance package over time, the taxes can be spread out. Consult with an accountant or lawyer about your specific tax obligations.

Find out home much severance pay you are entitled to in Alberta

The skilled employment lawyers at Taylor Janis Workplace Law fight hard to protect the legal right of Alberta employees. If your employment has been terminated, you should meet with a lawyer to determine whether the termination was lawful, and how much severance pay you are owed. Call 403-474-0411 today to schedule your consultation with a skilled Alberta employment lawyer.

  • One of the most common questions an employee asks after their employer terminates them is as follows: “how much of a severance package am I entitled to?” More Information

  • Reasonable Notice is a legal term that refers to how much notice or time an employer must give you, the employee, of the date your job will be terminated. In some cases, employers may choose to pay out a severance package in lieu of reasonable notice. More Information