Can Severance Pay Ontario Be Paid in Stock Options?

Severance Pay Ontario Be Paid in Stock Options

When a company decides to terminate an employee, it can be a shock. Even if the layoff was an expected event, the sudden change in your employment can bring up an array of emotions and questions such as where you’ll find another job and how you’ll cover your bills in the meantime.

If you’re facing job loss, it’s important to know your rights and responsibilities when it comes to termination, severance pay ontario and compensation. In this episode of our series The Law Show, employment lawyer Lior Samfiru breaks down the concept of severance pay ontario and discusses best practices that companies should adopt to ensure legal compliance.

severance pay Ontario is a specific form of compensation that employees are entitled to receive when they are laid off from a job. It is separate from, and in addition to, the notice or pay in lieu of notice that employers must provide to their employees under the Employment Standards Act (ESA). The ESA stipulates a minimum amount of severance pay for a terminated employee, which is one week of wages per year of employment with the employer up to a maximum of 26 weeks.

Can Severance Pay Ontario Be Paid in Stock Options?

However, many companies offer more than the minimum required under the ESA, and in some cases, an employee may be entitled to greater common law severance pay than what is set out in the statute. In such situations, it’s essential to consult with an experienced employment law attorney.

In recent case law, it has been held that a severance package should include all forms of remuneration, and not just the base salary of the employee. This includes bonuses, commissions, car allowances, health benefits and the like. As well, it’s important to note that the courts have been reluctant to uphold a contract or incentive plan that slashes an employee’s pay over their minimum common law reasonable notice period unless it is clearly and expressly worded to do so.

Depending on your province, territory and employer, severance payments can be taxed in different ways. For instance, your employer can choose to withhold income tax from your severance payment or they can choose to transfer it directly to your registered retirement savings plan (RRSP). In either case, you’ll need to consult with your tax advisor to determine how much to deduct from your lump sum payout. If you get severance payments in the form of stock options, there are some additional considerations.

For example, you might need to pay tax on the gain when the stock options are sold at a later date, or you may be required to report them to the Canada Revenue Agency as part of your taxable income. This is because these stock options could be considered a capital asset, and therefore are included in your income for income tax purposes. In most cases, however, the gains on your stock options will not be taxed until you sell them. For more information on this, see our blog post: Can you defer severance pay ontario and/or stock options?