# Is Severance Pay Mandatory in Canada?

> It depends on the jurisdiction. Federally regulated employees get mandatory severance pay after 12 months' service. In Ontario, it's mandatory only after 5 years' service and only if the employer has a $2.5 million payroll or is laying off 50+ people within 6 months. Alberta has no statutory severance pay at all.

Published 2026-08-22 · Last reviewed 2026-08-16 · [Canonical page](https://canadalegalcenter.ca/articles/is-severance-pay-mandatory/)

Legal information, not legal advice.

## The verdict on mandatory severance pay

**Usually no, unless you fall into one of two narrow statutory categories.** Severance pay is not a universal right in Canada. Whether it's legally owed depends entirely on which jurisdiction employs you, and in two of the three jurisdictions this site covers, the answer is conditional rather than automatic.

- **Federally regulated employees** (banks, airlines, telecoms, and other federal undertakings): severance pay is mandatory once you've completed 12 consecutive months of continuous employment, unless you were dismissed for just cause, under [section 235 of the Canada Labour Code](https://laws-lois.justice.gc.ca/eng/acts/L-2/section-235.html). [Canada.ca's guidance](https://www.canada.ca/en/services/jobs/workplace/federal-labour-standards/termination.html) confirms this in plain language: employers must provide severance pay once that 12-month threshold is met.
- **Ontario employees**: severance pay is mandatory only if you have at least 5 years of service *and* your employer meets a size test, under [sections 64-65 of the Employment Standards Act, 2000](https://www.ontario.ca/document/employment-standard-act-policy-and-interpretation-manual/part-iv-continuity-employment).
- **Alberta employees**: there is no statutory severance pay at all. [Alberta's employment standards guidance](https://www.alberta.ca/employment-standards-termination-and-lay-off) states plainly that severance is a common-law concept, not a requirement of the Employment Standards Code.

<div class="table-scroll">

| Jurisdiction | Mandatory by statute? | Qualifying condition | Amount |
|---|---|---|---|
| Federal | Yes | 12 consecutive months' continuous employment, no just cause | Greater of 2 days' wages per year of service or 5 days' wages |
| Ontario | Yes, conditionally | 5+ years' service, and employer payroll ≥ $2.5M/year or 50+ layoffs in 6 months | 1 week's pay per year of service, capped at 26 weeks |
| Alberta | No | N/A (common law or contract only) | Not fixed by statute |

</div>

## What changes the answer

**Federal:** the only condition is the 12-month continuous employment threshold and the absence of just cause. There's no employer-size test and no separate mass-layoff trigger the way Ontario has, under [section 235](https://laws-lois.justice.gc.ca/eng/acts/L-2/section-235.html).

**Ontario:** two separate conditions must both be met. First, the employee needs at least 5 years of service. Second, the employer must either pay at least $2.5 million in wages annually, or be laying off 50 or more employees within a 6-month period because of a business closure or downsizing, under [Ontario's severance pay guide](https://www.ontario.ca/document/your-guide-employment-standards-act-0/severance-pay). An employee can have 20 years of service and still not qualify if the employer's payroll falls under the $2.5 million line and no mass layoff is happening. Where it does apply, the formula is one week's pay per year of service, capped at 26 weeks total, under [section 65](https://www.ontario.ca/document/employment-standard-act-policy-and-interpretation-manual/part-iv-continuity-employment).

**Alberta:** there is no statutory route at all. [Alberta's government guidance](https://www.alberta.ca/employment-standards-termination-and-lay-off) is explicit that severance pay is "determined under common law and not required under the Employment Standards Code," though employment contracts sometimes include severance provisions voluntarily. Beyond the statutory minimum notice or pay in lieu, an Alberta employee's only avenue to additional compensation is a common-law wrongful dismissal claim, which Alberta's own guidance notes is "often referred to as severance pay" even though it isn't a statutory entitlement.

## A worked example

An Ontario employee has worked for the same employer for 6 years. The employer's total annual payroll is $3 million. Because the employee has more than 5 years of service and the employer's payroll exceeds the $2.5 million threshold, the employee qualifies for statutory severance pay under [sections 64-65 of the ESA](https://www.ontario.ca/document/employment-standard-act-policy-and-interpretation-manual/part-iv-continuity-employment). Applying the formula of one week's pay per year of service, the employee is entitled to 6 weeks of severance pay, well under the 26-week cap. If the same employee worked for a small employer with a $1 million payroll and no mass layoff underway, the same 6 years of service would not trigger any statutory severance at all.

## Common mistakes

- **Assuming Alberta works like Ontario.** Some employees terminated in Alberta assume they're owed statutory severance after several years of service. Alberta's Employment Standards Code has no such provision; only a contract term or a common-law wrongful dismissal claim can produce that outcome.
- **Checking only years of service in Ontario, not employer size.** Five years of service alone doesn't trigger Ontario severance pay; the employer also has to meet the $2.5 million payroll test or the 50-employee mass-layoff test.
- **Applying Ontario's 5-year rule to federally regulated jobs.** Federal employees only need 12 months of continuous employment, not 5 years, to qualify for mandatory severance under the Canada Labour Code.
- **Assuming Ontario severance keeps growing past 26 weeks.** The statutory formula stops at 26 weeks regardless of how many years beyond 5 the employee actually worked.

## Frequently asked questions

**Does Alberta require severance pay by law?**

No. In Alberta, severance pay is not a statutory entitlement under the Employment Standards Code; it exists only if an employment contract includes it, or through a common-law wrongful dismissal claim (roughly the US 'wrongful termination') for compensation beyond the statutory minimum notice or pay.

**How much severance is required under the Canada Labour Code?**

For federally regulated employers and employees, once an employee has 12 consecutive months of continuous employment and is not dismissed for just cause, the employer must pay the greater of two days' wages per completed year of service or five days' wages.

**Does every Ontario employee with 5 years' service get severance pay?**

Not automatically. In Ontario, 5 years' service is only one condition; the employee also needs to work for an employer with a payroll of at least $2.5 million a year, or be part of a group of 50 or more employees losing their jobs within 6 months due to a business closure or downsizing.

**Is severance pay capped in Ontario?**

Yes. Where it applies, Ontario's statutory severance pay is one week's pay per year of service, to a maximum of 26 weeks, regardless of how many additional years the employee worked.


## Sources

1. [Canada Labour Code, s. 235](https://laws-lois.justice.gc.ca/eng/acts/L-2/section-235.html), Canada Labour Code, RSC 1985, c L-2, s 235(1) (retrieved 2026-07-17)
2. [Canada.ca - Termination, layoff or dismissal](https://www.canada.ca/en/services/jobs/workplace/federal-labour-standards/termination.html), Government of Canada guidance on the Canada Labour Code (retrieved 2026-07-17)
3. [Ontario.ca - ESA Policy and Interpretation Manual, Part IV](https://www.ontario.ca/document/employment-standard-act-policy-and-interpretation-manual/part-iv-continuity-employment), Employment Standards Act, 2000, SO 2000, c 41, ss 64-65 (retrieved 2026-07-17)
4. [Ontario.ca - Your Guide to the Employment Standards Act: Severance Pay](https://www.ontario.ca/document/your-guide-employment-standards-act-0/severance-pay), Employment Standards Act, 2000, SO 2000, c 41, s 64; O Reg 288/01 (retrieved 2026-07-17)
5. [Alberta.ca - Employment standards: Termination and lay-off](https://www.alberta.ca/employment-standards-termination-and-lay-off), Employment Standards Code, RSA 2000, c E-9 (retrieved 2026-07-17)