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Q: What is pay in lieu of notice or severance?

Disclaimer

Pay in lieu of notice is the financial compensation that employers may give dismissed employees instead of giving advanced notice of termination.

Pay in lieu of notice is sometimes also referred to as termination pay or severance pay. However, in some Canadian jurisdiction “severance pay” has a different meaning, particularly under legislation, including in Ontario.

The amount

Employers can dismiss workers without just cause, if they provide adequate advanced notice of termination, or if they provide pay in lieu of advanced notice. Pay in lieu means the employer is giving the employee the same financial compensation that they would have received, had they been employed through to the end of the relevant notice period. It may include compensation for the loss of salary, benefits, bonus (unless the bonus policy has an enforceable provision saying otherwise), allowances, and even perks like an employer-paid phone plan.

(For more, see What is notice of termination? and How much severance pay am I entitled to?.)

Structuring the payment

Pay in lieu of notice can be structured given as a lump sum payment or salary continuance (among other possibilities). It can also be combined with working notice, as long as together they amount to the financial equivalent of adequate notice of termination. It is also permissible to provide for a reduced payment or cessation of salary continuance, to take effect if the employee gets new employment within a specified notice period.

Remember: don't take these articles as legal advice! If you have a legal issue, you should consult a lawyer, whether that be us or someone else . The law is riddled with exceptions and nuanced points. These articles only provide tid bits of information for the interested reader. They are by no means exhaustive.

Disclaimer

This website does not provide legal advice or opinion and should not be relied on as such advice or opinion. The articles here provide general information only. Tomm Law makes no claims, promises, or guarantees of the accuracy or completeness of the information. Articles are not updated after publication and may become outdated with changes in jurisprudence or legislation. Your use of this site is subject to the Terms and Conditions, which include disclaimers and waivers of liability.