Personal Finance

Severance Expectations?

  • Last Updated:
  • Apr 26th, 2016 4:38 pm
Tags:
None
Member
User avatar
Dec 14, 2004
210 posts
73 upvotes
Toronto

Severance Expectations?

I work at a large corporation in Canada which is undergoing a major restructuring. This is my first time going through something like this (I've been lucky, I guess), but I'm not too concerned for myself.

I am, however, extremely interested in what this company is offering as serverance to the affected staff. I believe that the Ontario minimum requirement is one week for each year of employment, but I'm not sure about that. Also, this company regularly reports over $1.3 billion in net profit each quarter, so I would hope they have budgeted for more than the minimum requirement.

I also have a defined benefits pension with this company, but I understand that there is the option to withdraw the present value of that pension and have it transfered somewhere else (but doing so forfeits any future pension from this company). They have also announced changes to the pension which will change it over to defined contribution at a date in the future.

I'd really like to be prepared with an action plan should the hammer (or axe in this case) fall on me. I wouldn't want to just accept the minimum if I should/could be getting more nor would I wish to make the wrong decision on the pension.

As background, I've worked for this company for just over 12 years and as of mid last year, my PV for my pension was just over $95K.

So I'm asking the community here for some advice. I understand that an employment lawyer is probably better, but I'm sitting on a bus on the way home and none is available at the moment.

Thanks,

- dvdrat
33 replies
Member
Dec 15, 2014
493 posts
803 upvotes
Vancouver, BC
Generally, they will offer you the minimum they can get away with legally. They may top it up with extended benefits for a year, retraining or career counselling. Pension wise, the pension is only as good if the company still exists, (ei. Nortel). Especially if your company pension is underfunded... it is even worse.
Deal Addict
Sep 2, 2010
1775 posts
823 upvotes
Bummer's Roost
I think the one week per year payout tops out at 4 or 8 weeks, but this may be an Ontario thing thanks to Mike Harris. If I am wrong would appreciate knowing myself. This is the great thing about the internet. Previously, people had no clue and a limited information base, so were prone to being taken advantage of.
Member
User avatar
Dec 14, 2004
210 posts
73 upvotes
Toronto
Thank you. That is pretty much what I expected out of them. Howwever, you do say that they will "offer" the minimum, so I hold out hope that there will be some room to negotiate something better. And while I don't expect this company to pull a Nortel, I think I agree that it's better to take the pension and have it managed by my own financial advisor.

People are coming into the office being marched to a meeting and then never heard from again. All levels, from execs to senior managers to foot soldiers. It's not a happy feeling, but we continue to get e-mails about how we're going to be better.

Thanks,

- dvdrat
Deal Fanatic
Jan 21, 2014
8513 posts
6259 upvotes
Big company's standard practice was used to be 1 month per year and top out at 12 months. But most of them have reduced to 2 weeks in the last few years. I think you probably will get at least 2 weeks/year (keep your fingers crossed)
Member
User avatar
Dec 14, 2004
210 posts
73 upvotes
Toronto
Just checked the Ontario Ministry of Labour's website and it seems that the max is definitely larger than eight weeks, as I would qualify for a minimum of 12.32 weeks of severance.

Thanks,

- dvdrat
Deal Expert
Jan 27, 2006
21844 posts
15620 upvotes
Vancouver, BC
mkl38s wrote: Big company's standard practice was used to be 1 month per year and top out at 12 months.
This is what I recently got. Most of my benefits were also extended out to 1 year as well.

Most big companies try to be a bit more 'generous' than the minimum legal requirements as long as you sign a release stating that you won't fight the layoff and absolve them of all legal issues. If you don't sign it, then they will only offer what you are legally entitled to.
Banned
Mar 11, 2016
2081 posts
893 upvotes
dvdrat wrote: I work at a large corporation in Canada which is undergoing a major restructuring. This is my first time going through something like this (I've been lucky, I guess), but I'm not too concerned for myself.

I am, however, extremely interested in what this company is offering as serverance to the affected staff. I believe that the Ontario minimum requirement is one week for each year of employment, but I'm not sure about that. Also, this company regularly reports over $1.3 billion in net profit each quarter, so I would hope they have budgeted for more than the minimum requirement.

I also have a defined benefits pension with this company, but I understand that there is the option to withdraw the present value of that pension and have it transfered somewhere else (but doing so forfeits any future pension from this company). They have also announced changes to the pension which will change it over to defined contribution at a date in the future.

I'd really like to be prepared with an action plan should the hammer (or axe in this case) fall on me. I wouldn't want to just accept the minimum if I should/could be getting more nor would I wish to make the wrong decision on the pension.

As background, I've worked for this company for just over 12 years and as of mid last year, my PV for my pension was just over $95K.

So I'm asking the community here for some advice. I understand that an employment lawyer is probably better, but I'm sitting on a bus on the way home and none is available at the moment.

Thanks,

- dvdrat
sounds like u may be a BNS victim....I quit last yr and decided to retire at 47 rather than my original plan of 50...I had 15 yrs and CSV of about 118k plus my other investments and no debt.....someone mentioned 1month per year....this is quite realistic...a friend of mine just got packaged from TD due to restructuring and after 15 yrs actually got 2 yrs salary...best of luck...
Sr. Member
Mar 4, 2010
572 posts
285 upvotes
Toronto
i would recommend going with what some of the other posters have. if you are working as a professional in a white collar position, the type of layoff etc, you should be looking at 3-4 weeks per year of service. in Ontario, you qualify for severance (which kicks in after 5 years of service) and it really puts favour to the employee.

my suggestion:
do NOT sign anything on the spot. they want that. there is no deadline to respond by. even if they have it on the termination letter. it means nothing, its a pressure tactic. take it home, read it once, get upset. whenever i receive bad news or get upset with something, i take 24 hours before responding, trust me its saved a lot of escalation. you'll be very emotional as its tough to lose a job you've had for so long.

once you have calmed down and rationalized it better, you can either sign it (if its a good package), respond directly to HR yourself, or contact an employment lawyer. i would believe 3-4 weeks per year + pension accrual + full benefit is your target. ask for 4 weeks per year and settle on 3.
Deal Guru
Aug 5, 2006
10745 posts
7903 upvotes
Global Village
Expect them to offer you 2-3 weeks per year of service. For 12 years if they offer you less than 24 weeks of pay tell them you'll need to think about it, don't sign anything and immediately take the offer to an employment lawyer.
Deal Fanatic
User avatar
May 2, 2006
8355 posts
2267 upvotes
GTA
From my past experience with a major global corp: 1 month for each year of service + 10% of yearly salary bonus + 3% compensation for loss of benefits. I was actually quite happy to be let go at the time as I had a job lined up immediately after. Mind you, I was on very good terms with everyone above me and had glowing yearly performance reviews. I'm sure that affected what I was offered.
Deal Addict
Apr 21, 2014
2321 posts
1106 upvotes
Alberta
It all depends on your position and age. It should be no less than 36 weeks. If it is, go to an employment lawyer directly. In my precious experience the employment lawyer got me an extra month of salary and benefits and also had them pay for her services. So nothing out of my pocket.
Deal Addict
Jan 30, 2012
1836 posts
1399 upvotes
TORONTO
LuckBox wrote: Pension wise, the pension is only as good if the company still exists, (ei. Nortel). Especially if your company pension is underfunded... it is even worse.
Yes and no. Pensions are strongly regulated in Canada. A company can't just say that they promise to pay you a pension in the future. There is a legal process, real money is irrevocably contributed to the pension plan and can't be used for any other purpose.

As a result, Nortel pensioners fared pretty well when Nortel went bankrupt. By comparison, other employees, such as employees on Nortel's disability plan, were screwed because they don't have the legal protection that pensioners do.

If a company goes belly up this morning, all of the funds in the pension plan are exclusively for the pensioners.

You are correct that pension plans are typically underfunded, but there are legal limits to how big the underfunding can be.

As to OP's question, the requirement for severance comes from 3 places:

1. contract law (what does your contract of employment say)
2. statute law (what the laws passed by govt say)
3. case law (what the courts say)

Most contracts don't mention severance requirements.

There are statutory minimums that apply in most cases, and during mass layoffs the statutory requirements are often bigger.

However, the courts routinely award much larger amounts that the minimum set by statute. Don't look at a severance offer and say, "They are offering more than the statutory minimum, so it's a good deal and I should accept it."

Regardless of what you are offered, remain calm, it's not personal, it's just business. Don't sign anything and consult immediately with an employment lawyer (it should take less than 30 minutes and not cost you very much).
Member
User avatar
Dec 14, 2004
210 posts
73 upvotes
Toronto
Back at work this morning and my access is still working, so I've completed another week!

Please note that I am not yet impacted by what's going on, but I really appreciate the insights you have shared. It'll be of great help and value to me (perhaps more than all the deals I've gotten in on here RFD) if the worst happens.

Would it be wrong for me to find another job and quit, thereby forfeiting any potential package? I know we shouldn't treat a package as a windfall, but I consider myself fully employable so if the worst happens, I won't be out of a job for too long (knock on wood).

Thanks

- dvdrat
Deal Addict
User avatar
Sep 9, 2007
2241 posts
447 upvotes
i got laid off from big oil (Calgary HQ, but our function was based in ON) last year

i got what worked out to 1 month per year of service
it came in waves

for the first 2 months, i was still on pay roll basically i was on paid vacation. full benefits.

the next 2 months was paid out in one bulk payment.

the rest was paid out in another bulk installament.

i was told that the legal min is 1 wk per year of service, and if the company is of a certain size (i think over 50 employees & 20M annual rev), that's another week per year of service.

the rest was hush money.

your pension depending on the provider will let you stay on, or you can transfer it to any other financial institution as a locked in rrsp account.

good luck! getting laid off from big oil was the best thing to happen to me, i hope you find the positive in your situation.
Deal Addict
Nov 30, 2011
1161 posts
518 upvotes
HRM
If you work for a federally regulated company (ie a Bank) then Ontario labour code does not apply. You need to review the Federal labour code which is different. Many Banks pay 1 week for every year for non mgmt and up to one month for every year for management. You will also get more depending on your age (future employability in your area of expertise). If you do not sign the release they will pay you statutory minimum. Depending on amount you are seekibg you can take them to small claims and they will settle. Banks don't like law suits, especially by those who have been made redundant en masse.
Deal Fanatic
User avatar
Apr 16, 2006
6241 posts
708 upvotes
dvdrat wrote: Thank you. That is pretty much what I expected out of them. Howwever, you do say that they will "offer" the minimum, so I hold out hope that there will be some room to negotiate something better. And while I don't expect this company to pull a Nortel, I think I agree that it's better to take the pension and have it managed by my own financial advisor.

People are coming into the office being marched to a meeting and then never heard from again. All levels, from execs to senior managers to foot soldiers. It's not a happy feeling, but we continue to get e-mails about how we're going to be better.

Thanks,

- dvdrat
.

Speak to an employment lawyer before you sign anything. The few hundred bucks you spend could result in you getting significantly more in your severance package.

To get you started in a totally-not-legal-advise direction pointing, generally speaking there's two forms of notice. One is statutory notice, the other is common law notice.

Statutory notice sets out the mandatory minimum notice period your employer must give you if they are going to let you go. This is based on the number of years you've worked there. They either have to tell you, with that many weeks notice, that you will be let go, or they will tell you immediately, pay you out as if you had been working there for the weeks you were entitled to, and walk you out the front door. The latter typically occurs because keeping employees around that you've laid off is usually a terrible idea. You are entitled to this notice period and this pay even if you get a new job within that time period. There is no obligation to pay any of that back. Most provinces have a maximum of 8 weeks of mandatory notice, but you'll usually have to have worked for the same employer for a lot of years to get that much.

Common law notice is more fluid. The rule of thumb is 3 weeks / year for every year you've worked for that employer, +/- 1 week / year depending on your soft factors such as the type of job you had, how old you were, the likelihood of you being able to get a similar job and when that is likely to occur, etc. This is not in addition the statutory notice period; it overlaps it. If your employer only offers you the statutory minimum, the only way you can try to get more out of them is to sue them. It may not be worth it after legal bills depending on how much you're looking at.

Anyway, best of luck.
Banned
Dec 5, 2015
2038 posts
429 upvotes
Concord, ON
Big companies should be generally 1 mth per year of service plus all the bonuses and stock options you would've gotten...
Deal Fanatic
User avatar
Apr 11, 2008
5754 posts
475 upvotes
GrandePike wrote: Big companies should be generally 1 mth per year of service plus all the bonuses and stock options you would've gotten...
Not any more. IBM, for example, just capped their severance at 1 month's pay in the US.
Deal Expert
Jan 27, 2006
21844 posts
15620 upvotes
Vancouver, BC
Archanfel wrote: Not any more. IBM, for example, just capped their severance at 1 month's pay in the US.
In the US, it's a completely different animal and you really can't compare it. I used to manage US employees...

Top