When an employer terminates an employee, one of the things that they may be offered is a severance package.
This type of agreement can help to provide short term financial security for an individual who has been terminated from their place of employment.
In British Columbia, there are specific guidelines in place for what needs to be included in a severance agreement.
If you are unsure about your rights with respect to severance, then keep reading.
Why Do Companies Offer Severance Packages?
In accordance with BC employment law, if your employment contract is terminated, you could be eligible to enter into a severance agreement with your employer.
Typically, if one or more of the following circumstances apply to you, an employer has an obligation to enter into a severance agreement:
- your employment contract is terminated without adherence to the minimum notice period (see discussion below),
- your employment is terminated without just cause, or
- your employment contract is terminated immediately despite giving notice for your resignation.
BC Termination Notice Periods
In terms of the employment legislation in British Columbia, you are typically required to receive enough notice before your employer terminates your employment contract. The following minimum notice periods apply in terms of the BC employment standards:
- one weeks’ notice after three months of continuous employment;
- two weeks’ notice after twelve consecutive months of employment;
- three weeks’ notice after three years of employment; and
- one extra week for each year that you are employed after three years (up to a maximum of eight years).
If your employer does not follow these notice period guidelines and terminates you without at least the relevant notice period, you could be eligible to be compensated through a severance agreement.
What Is a Severance Agreement?
A severance agreement also referred to as a severance package, is an indemnity negotiated between the employer and employee when employment ends. The severance terms will be outlined in writing upon your termination of employment.
The purpose of a severance agreement is to offer the employee enough compensation to support themselves during the transitional period before finding new employment. Typically, this severance package or agreement is in exchange for waiving all rights to sue your employer on the grounds of wrongful dismissal.
The severance agreement details how much compensation you can claim for being let go without proper notice by your employer or if they have violated any provisions under BC’s Employment Standards Act.
How much severance pay can I expect?
It’s important to note that severance agreements are legally binding contracts between a company and its employees, so it should be reviewed by an expert employment lawyer if possible prior to signing off on one.
Factors that determine severance pay are, but not limited to: you age, length of service, nature of your work, and how difficult it will be to become re-employed.
Even if you don’t have the opportunity to review or draft severance agreements with a lawyer, it is still important that you are familiar with severance terms and conditions prior to signing off on one. Otherwise, your rights could be waived without even knowing so.
How is severance pay calculated?
Thankfully, there are general guidelines to help you determine how much severance pay you are owed if you lose your job. Depending on how long the company has employed you, you can expect the following severance as a minimum:
- after working for three months, you are entitled to one week’s pay as severance;
- after working for twelve consecutive months, you are entitled to two full week’s pay;
- after working for three consecutive years, you are entitled to three full week’s pay;
- after working for each additional year, you are entitled to a week’s full pay. The maximum amount of severance you can receive is eight weeks of pay.
However, these are merely minimums standards set by legislation. You may be entitled to greater amounts and an experienced employment lawyer could be in a better position to negotiate a fair severance package for you.
How is severance pay paid out?
If you are entitled to severance pay, you may be paid out in the form of a lump sum payment, a salary continuance, or payments over time. The amount may depend on how much.
You may be required to pay income tax on your severance payments. We recommend speaking with an accountant to better understand your tax situation.
Key Takeaways
There are rules that employers must follow when it comes to severances, and understanding them is essential if you wish to be compensated adequately for your years of service.
Severance only becomes payable at the termination of employment if it was without notice or cause.
There are general guidelines to help you establish if you have been terminated without cause or without proper notice and what severance is deemed to be fair. Understanding these guidelines can help immensely during negotiations for more adequate severances.
We recommend you engage the services of an employment lawyer before entering into any agreement in the employment setting.
Whether you have been terminated and offered a severance package, wrongfully terminated, or discriminated against in the workplace – Zoe Arghandewal can assist you in negotiating a severance agreement that is reasonable and favourable in the given circumstances.
If you’d like us to help you negotiate a favourable severance, contact us today!