When it comes to employment contracts, the topic of severance can often be a point of confusion or contention between employers and employees. Severance pay is the compensation an employee receives upon termination of their employment, and is typically calculated based on factors such as length of service, job level, and salary.
If you’re an employee, it’s important to understand your rights regarding severance pay and to ensure that your employment contract includes clear language regarding severance in the event of termination. If you’re an employer, it’s equally important to be transparent with your employees regarding your company’s policies and procedures for severance pay.
Here are some key considerations to keep in mind when it comes to severance in your employment contract:
1. Know your provincial or territorial labour laws
Each province and territory in Canada has specific labour laws that dictate minimum standards for employment contracts, which may include requirements for severance pay. As an employer, it’s important to ensure that your employment contract is compliant with these laws to avoid any legal issues down the line.
2. Clearly define the terms of severance pay
In your employment contract, be sure to clearly define the terms of severance pay, including how it will be calculated, how it will be paid out, and any conditions that must be met in order for the employee to receive it. This will help to avoid confusion or disputes regarding severance pay in the event of termination.
3. Consider offering a more generous severance package
While the minimum standards for severance pay may be dictated by provincial or territorial labour laws, it’s important to consider offering a more generous severance package as an employer. This can help to incentivize employees to stay with the company for longer periods of time, which can in turn save the company money in recruitment and training costs.
4. Be prepared for negotiations
In the event of termination, negotiations surrounding severance pay may be necessary. As an employee, it’s important to be prepared to advocate for yourself and negotiate a fair severance package. As an employer, it’s important to be transparent and open to discussion regarding severance pay to avoid any potential legal issues or negative impacts on employee morale.
In summary, including clear and comprehensive language regarding severance pay in your employment contract can help to avoid confusion or disputes regarding this important topic. As an employee or employer, it’s important to understand the legal requirements for severance pay in your province or territory, and to be prepared to negotiate a fair severance package if necessary.