So, We're Talking Severance…
Alright, let’s get into it. If you’re here, you’re probably wondering, “What’s the deal with severance?” Maybe you’re an employee staring at a letter with the words “termination” on it. Or maybe you’re an employer wondering how much you actually have to pay when it’s time for someone to move on. Either way, you’ve come to the right place.
Here’s the thing — severance isn’t as simple as “2 weeks for every year of service.” Let’s walk through what people don’t tell you about severance — whether you’re in Canada or the United States (because, spoiler alert, the rules aren’t the same).
“2 Weeks Per Year of Service” is Not the Golden Rule
This one is as common as “wait 30 minutes after eating before swimming” — and just as outdated. Sure, you might hear this rule tossed around at BBQs or from that one uncle who’s “basically a lawyer,” but in reality, that’s not how it works.
If You’re in Canada 🇨🇦
Canada doesn’t have a “2 weeks per year” rule — not officially, anyway. In most provinces, severance may be calculated on several factors, like:
How long you’ve worked there (tenure matters, but it’s not everything)
Your role and responsibilities (senior roles = more $)
Your age (older employees tend to get more)
How tough it’ll be to find a new job (job market conditions)
Sometimes, “2 weeks per year” is just a shortcut companies use to guesstimate the payout, but legally, it’s not a rule.
If You’re in the U.S. 🇺🇸
In the U.S., things are a little looser. Unlike Canada, where provincial laws set minimum payouts, there’s no federal requirement for termination pay in most cases. Severance is usually dictated by company policy, employment contracts, or the terms of a severance agreement. Some states (like California) have slightly different interpretations of “final pay” and what needs to be paid on the last day, but severance itself? It’s optional.
Employers, take note: If you think you can get away with the “2 weeks per year” rule, you may be in for a surprise if an employee lawyers up.
You Can Ask For / Give More Than Just Money
When people think “severance,” they think cash. And while yes, cash is king, it’s not the only thing you can negotiate for, or give to an employee.
Here’s some other items that may be part of a severance package (that most people forget about):
🏥 Extended Benefits: Medical, dental, and insurance don’t have to end on your last day. In Canada, employees can sometimes negotiate for extra health coverage. In the U.S., you can negotiate for a COBRA subsidy.
👔 Career Coaching: Companies may offer resume help or job search support as part of severance packages.
📈 Equity / Stock Options: If you’re at a startup or company with equity, figure out what happens to your shares. Can you exercise them early? Do they vest?
📝 Reference Letters: If you had a good relationship with your manager, get a positive reference letter before you leave. It’s much easier to get one before you’re gone.
Employers, if you don’t want employees to push for cash, consider offering some of these other perks. It’s a win-win.
Severance ≠ Termination Pay (But They’re Cousins)
People often think “severance” and “termination pay” are the same thing, but they’re not. Here’s the difference:
In Canada 🇨🇦
Termination Pay: If you’re let go without notice, your employer owes you notice pay under Employment Standards. The amount will differ depending on the province you reside in.
Severance Pay: This refers to the ‘extra’ pay (or perks) provided beyond what is legally required under Employment Standards, and is typically at the company’s discretion.
In the U.S. 🇺🇸
Termination Pay: U.S. employers aren’t legally required to give termination pay unless it’s in a contract. However, you’re entitled to payment for all hours worked + any unused but accrued vacation.
Severance Pay: Purely optional, but sometimes employers offer it in exchange for a release of claims (more on that next).
You Might Have to Sign a “Release”
If you’re offered a severance package, the company will most likely hand you some sort of release document. It basically says, “If we give you this money, you agree to the terms of the termination, and you promise not to sue us later.” But here’s the kicker — they can’t ask for your signature without giving you something in return. So ensure that they are in fact giving you severance pay, extended benefits, or other perks that go beyond what you’re already legally entitled to (like final wages or termination pay). Without that “something extra,” the release might not hold up if challenged.
Key Clauses to Look For
Non-Disparagement: Prevents employees from bad-mouthing the company. Keep it reasonable, or it may not hold up in court. Employees, ask for a mutual clause so the company can’t bad-mouth you either.
Non-Compete / Non-Solicitation: Use these clauses carefully, especially in Canada where overly broad restrictions often get thrown out. Employees, is the clause too broad? Ask for it to be limited to specific roles or competitors.
General Waiver of Claims: Ensures employees can’t sue you later for things like wrongful dismissal. Employees, signing means you’re giving up your right to sue — ensure you’re getting enough in return.
💡 Tips for Employers
Keep your release form clear and specific. Overly broad clauses, like sweeping non-competes, often won’t hold up in court. Offer something of value — like extra severance or benefits — to ensure the release is enforceable.
💡 Tips for Employees
Take your time before signing a release — in some cases, you have a legal right to a review period (like if you're over the age of 40 in the U.S.). Don't be afraid to negotiate for better terms, like more pay, benefits, or a reference letter.
The TLDR on Severance
Here’s the short version:
“2 weeks per year” is a myth. Severance depends on role, tenure, and local laws.
Severance is negotiable — employees may push back, so build in room to adjust.
Severance ≠ termination pay (and U.S. rules differ from Canadian rules).
If there’s a release form, read it carefully.
If you’re an employee and you’re holding a severance offer, take your time to read through it and don't be afraid to ask questions. If you’re an employer, be careful with how you offer it — a little more generosity up front can prevent a bigger legal battle later.
Want help navigating severance as an employer? Reach out to Chase & Co. HR. We can help break down what’s required, what’s smart, and how to dodge costly legal curveballs — so everyone walks away feeling (mostly) happy.
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