HR Glossary  /  End of Employment  /  Termination Pay 

Termination Pay 

What is termination pay? 

Termination pay is any pay provided in lieu of the required termination notice. The amount of termination pay given to an employee is any income the employee would have earned during the legislatively required termination notice period. Instead of notifying an employee that their employment will be terminated in several weeks, employers have the option to pay the employee a lump sum equal to the wages they would have been entitled to for that period, and terminate their employment immediately. 

Some reasons cannot be relied on by employers as just cause for termination. These reasons are usually protected by statute. For example, an employer cannot terminate an employee for cause just because they learn the employee is pregnant. This type of leave is protected under human rights law. Different jurisdictions outline other protected actions that cannot be considered just cause for termination and how termination pay is calculated. This could be participation in a union or making health and safety complaints. Some jurisdictions also provide separate complaint mechanisms and remedies for these circumstances. Under Ontario’s Employment Standards Act, 2000, an employment standards officer has the authority to reinstate an employee.

Risks of wrongful termination

Employers should always exercise caution when making just cause allegations, as one that is found to be unsuccessful can be costly. Some jurisdictions also offer mechanisms for employees who are terminated with cause to challenge these decisions. Usually, employers must provide employees working notice or termination pay in lieu of notice when ending their employment. These instances are referred to as “termination without cause” or “termination not for cause.” “Cause” is not the same as “a reason.” Only certain, serious reasons rise to the level of “just cause” for termination. All other terminations are considered “without cause.”

For expert tips designed to help develop smooth termination procedures, our blogpost, How to Write a Termination Letter (With Samples), can get you started today.  

HR is more manageable with HRdownloads!

Get one HR tool